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·1· · · · · ·MARYLAND INSURANCE ADMINISTRATION

·2· · · · · · 200 ST. PAUL PLACE, 24th Floor

·3· · · · · · · ·BALTIMORE, MARYLAND 21202

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·6· · · · · · ·LONG-TERM CARE PUBLIC HEARING

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·9· · · · · · _____________________/

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11· · · · · · · · ·TRANSCRIPT OF HEARING

12· · · · Before Deputy Commissioner NANCY GRODIN

13· · · · · · · · · Baltimore, Maryland

14· · · · · · · · Monday, August 20, 2018

15· · · · · · · · · · · ·9:00 a.m.

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18· Job No.:· WDC-180365

19· Pages:· 1 - 46

20· Reported by:· Susan Farrell Smith

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·1· · · · · ·Hearing held at the offices of:

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·4· · · · · · ·Maryland Insurance Administration

·5· · · · · · ·200 St. Paul Place, Suite 2400

·6· · · · · · · Baltimore, Maryland 21202

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13· · · · · · Pursuant to Public Notice, before Susan

14· Farrell Smith, Notary Public for the State of

15· Maryland.

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·1· APPEARANCES:

·2· · · · · · Nancy Grodin, Deputy Commissioner

·3· · · · · · Todd Switzer, Chief Actuary

·4· · · · · · Robert Morrow, Associate Commissioner

·5· · · · · · Adam Zimmerman, Actuary

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·1· OPENING STATEMENTS:

·2· · · · · · By Deputy Commissioner Grodin· · · ·5

·3· · · · · · By Mr. Switzer· · · · · · · · · · ·10

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·5· TESTIMONY OF CARRIERS:

·6· · · · · · By Mr. Plumb· · · · · · · · · · · ·18

·7· · · · · · By Mr. Fawthrop· · · · · · · · · · 27

·8· · · · · · By Mr. Kinney· · · · · · · · · · · 39

·9· · · · · · By Mr. Anderson· · · · · · · · · · 46

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11· PUBLIC COMMENT:

12· · · · · · By Mr. Burgan· · · · · · · · · · · 53

13· · · · · · By Mr. Hutman· · · · · · · · · · · 57

14· · · · · · By Ms. Rams· · · · · · · · · · · · 75

15· · · · · · By Ms. Leimbach· · · · · · · · · · 77

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·1· · · · · · · · P R O C E E D I N G S

·2· · · · · · COMMISSIONER GRODIN:· All right.

·3· Welcome, everyone.· And thank you for coming today.

·4· I am Nancy Grodin, Deputy Commissioner of the

·5· Maryland Insurance Administration.

·6· · · · · · And this is our third public hearing on

·7· specific carrier rate increases for long-term care

·8· insurance in 2018.

·9· · · · · · Today's hearing will focus on several

10· rate increase requests now before the MIA in the

11· individual long-term care market.· These include

12· requests from Senior Health Insurance Company of

13· Pennsylvania proposing increases of 15 percent; John

14· Hancock Life Insurance Company proposing increases

15· of 15 percent; MedAmerica Insurance Company

16· proposing increases of 4.2 percent; and

17· Massachusetts Mutual Life Insurance Company

18· proposing increases of 15 percent.

19· · · · · · These requests affect about 6,214

20· Maryland policyholders.· The goal of today's hearing

21· is for the insurance company representatives to

22· explain their reasons for rate increases.

·1· · · · · · We will also listen to comments from

·2· consumers and other interested parties.· We are here

·3· to listen and ask questions of the carriers and

·4· consumers regarding the specific rate increase

·5· requests.

·6· · · · · · I would like to take a moment to have

·7· each of the people here at the front table introduce

·8· themselves, and then we will go into the audience

·9· and have the other MIA staff members introduce

10· themselves.· Starting to my right.

11· · · · · · MR. ZIMMERMAN:· I'm Adam Zimmerman.· I'm

12· an actuary at the Maryland Insurance Administration.

13· · · · · · MR. MORROW:· Bob Morrow, I'm the

14· Assistant Commissioner for Life and Health.

15· · · · · · MR. SWITZER:· Todd Switzer, Chief

16· Actuary.

17· · · · · · COMMISSIONER GRODIN:· Thank you.· And

18· let's go around room now starting with Nancy.

19· · · · · · MS. MUHLBERGER:· Nancy Muehlberger,

20· Actuary.

21· · · · · · MR. PATTI:· Michael Patti, Government

22· Relations Associate at MIA.

·1· · · · · · MS. KWEI:· May Kwei, Chief of Life and

·2· Health Complaints.

·3· · · · · · COMMISSIONER GRODIN:· And at the table.

·4· · · · · · MS. IMM:· Tracy Imm, I'm the Director of

·5· Public Affairs.

·6· · · · · · MR. SVIATKO:· Joe Sviatko, Public Affairs

·7· Office.

·8· · · · · · MR. BURGAN:· My name is Barry Burgan.

·9· I'm a policyholder.

10· · · · · · COMMISSIONER GRODIN:· Thank you, sir.

11· All right.· I'm going to go over a few procedures

12· that we would like to follow today.· First of all,

13· there is a handout that has all of our contact

14· information on it.

15· · · · · · THE REPORTER:· Put the microphone up.

16· · · · · · COMMISSIONER GRODIN:· It was at the front

17· table, and please make sure to pick one up.· If you

18· would like to speak today, you will need to sign up

19· on the sheet.· And we do have a number of people who

20· have signed up to speak, and include your name and

21· contact information.

22· · · · · · We will only be calling the names of

·1· those folks listed on the sign-up sheet and those

·2· who RSVP'ed in advance to speak.

·3· · · · · · Second with the exception of MIA staff,

·4· this hearing is not a question/answer forum.

·5· Comments from interested parties were received and

·6· reviewed in advance of this meeting.· And please

·7· continue to submit your comments until Monday,

·8· August 27th.· And, again, the MIA will continue to

·9· keep the record open until Monday, August 27th.

10· · · · · · The transcript of today's meeting as well

11· as all written testimony that's been submitted will

12· be posted on the MIA's website on the long-term care

13· page as well as the quasi-legislative hearings page.

14· · · · · · The long-term care page can be found at

15· the MIA website by clicking on the long-term care

16· tab located under the quick link section which is on

17· the left-hand side of our page.

18· · · · · · As a remainder, we do have a Court

19· Reporter here today to document the hearing.· When

20· you are called up to speak, please state your name

21· and affiliation clearly for the record.· And I'm

22· assuming that we will pass this microphone over to

·1· anybody -- oh, there is microphone over there.· So

·2· hold it close.

·3· · · · · · All right.· If you are dialing into the

·4· hearing through our conference call line, we ask

·5· that you please mute your phones.· Please, please

·6· don't put us on hold.· What this does is it

·7· broadcasts your music.· It happened in our last

·8· hearing.· It was very disruptive.

·9· · · · · · So, I'm going to ask again, please do not

10· put us on hold.· It will broadcast your hold music.

11· Even if you don't think you have hold music, you do.

12· So, please put us on mute.

13· · · · · · Also any time before speaking if you

14· could please restate your name and your

15· organization, that would be a great help.· And thank

16· you.

17· · · · · · We're going to be asking carriers to come

18· up individually to speak regarding their rate

19· requests A to Z.· Afterwards, interested

20· stakeholders and those dialing in via conference

21· call line will be invited to speak.

22· · · · · · All right.· So, does anybody at the front

·1· table have anything they would like to say?

·2· · · · · · MR. SWITZER:· Yes.

·3· · · · · · COMMISSIONER GRODIN:· Okay.

·4· · · · · · MR. SWITZER:· Good morning.· I would like

·5· to thank everyone who is here.· It seems like the

·6· Affordable Care Act gets most of the attention, but

·7· long-term care is every much as much in a situation

·8· that needs a lot of input and a lot of attention to

·9· address some of the concerns that are dire.

10· · · · · · We currently have -- there is 10 of us in

11· the actuaries team.· We have 35 long-term care rate

12· filings in-house.· I think by the end of this

13· meeting, we will have five more.· They just keep

14· coming.

15· · · · · · The increases range from 30 -- the

16· average is a 36 percent increase, despite the 15

17· percent cap, and lot of companies file nationwide.

18· The range is from 4 percent to 112 percent.

19· · · · · · Just trying to put some numbers to a lot

20· of the points that you've made and others have made

21· through public comments, that the increases are

22· large.· And we will get to the insurer side as well.

·1· · · · · · The NAIC is -- is very active in looking

·2· at this.· Price Waterhouse Coopers fairly recently

·3· put out an article about long-term care, entitled

·4· Crisis of Confidence: A Call to Action.· There are a

·5· lot of eyes on this, and we're trying to increase

·6· the number of eyes on this.

·7· · · · · · I would also like to thank the people who

·8· submitted public comments.· We had five.· And for

·9· example, Charles bought the policy 17 years ago from

10· one of the carriers here today.· It cost 2,500 at

11· the time; it costs 5,000 today.· They can't keep up.

12· · · · · · Tim and Bonny also have a -- coverage

13· with a carrier here today.· Some of their comments I

14· pulled out.· They said they worked hard to plan

15· their retirement.· They don't want to shift costs to

16· their children or the government.· Please give us

17· more information, provide us some assistance.

18· · · · · · Jeff on the Eastern Shote talked to us

19· about the longevity of long-term care.· He said in

20· plain language, a lot of people are just trying to

21· have some security, some dignity in these years.

22· Give us some liberal alternatives.

·1· · · · · · I'm going to try to briefly respond to

·2· some of these.· Ed, who I hope is here today, who

·3· asked, well, how much latitude does the MIA really

·4· have?· Are your hands tied or what?· And how are

·5· carriers being held to account?· Questions like

·6· that.

·7· · · · · · And lastly, Karen pointed out that one of

·8· the carriers here is very financially strong.· Some

·9· of her clients are just at this point in time

10· reaching their 70s and 80s, and it's not the time to

11· scale back benefits in order to offset premiums.

12· · · · · · First to the question of the MIA's

13· latitude.· Maryland code says the rates must be

14· reasonable in relation to benefits.· It says other

15· things, but the key ones, not inadequate or

16· excessive or unfairly discriminatory.

17· · · · · · So, as you know, there is balance there.

18· They can't be inadequate.· They are businesses.

19· They were projecting costs 20, 25, 50 years out.· We

20· recognize that.

21· · · · · · They also need to be reasonable.· They

22· need to be -- they can't be discriminatory, can't be

·1· excessive.· I think we need to consider all the

·2· facts of if an increase is needed, should it be

·3· gradual.· The assumptions, the range of people touch

·4· on, is the company currently in a bad situation or

·5· will they be in a bad situation in 10 or 20 years?

·6· They both are actuarial matters that need to be

·7· squarely addressed, but ones that come to mind.

·8· · · · · · So, as far as plain language, why are

·9· increases coming in so frequently and at the

10· magnitude they are coming in?· A lot of this you

11· know, but just to put some numbers to it, the

12· percentage of Americans over age 80 in 2015 was 2.9

13· percent.· In 2050, it's a ways out, but that's

14· projected to be 7.3 percent.· It's nearly triple.

15· That's significant.

16· · · · · · The number of Americans over age 65 in

17· 1970 was 8 percent; in 2050 it will 20 percent.· And

18· of those 20 percent, another 20 percent of them will

19· need care for five years.· That effects costs; it's

20· a reality.

21· · · · · · It is true that statistics I heard in the

22· '60, the average family was having 2.2 children to

·1· care for their parents when they were older.· The

·2· number is down to 1.4.· That's not as available to

·3· seniors.

·4· · · · · · And lastly, people aren't saving as much

·5· money that -- in 1980 according to the World Bank

·6· 21 percent of the GDP was savings.· Today in 2010,

·7· it keeps coming down, it's 15 percent.· So, just a

·8· few numbers to why we are where we are.

·9· · · · · · Some of the consequences, in Maryland we

10· have 129,000 seniors with long-term care coverage.

11· It provides a valuable benefit.· Long-term care

12· started in the '70s, the late '70s as you know.

13· Maryland had 38 carriers.· I'm excluding the ones

14· that sold it with life insurance.· 25 have left.· We

15· are down to 13.

16· · · · · · Most recently in March, State Farm was

17· the 25th to leave.· So, we keep that in mind as

18· well.

19· · · · · · So, what has been done?· What is the MIA

20· doing?· What will we do?· What's been done, one, we

21· are the only State that has a 15 percent cap. I

22· know that's not a panacea.· I know Illinois looked

·1· at it and didn't do it.· But it's a cap that works

·2· both ways.

·3· · · · · · I think it grades an increase for the

·4· companies that are really in a bad position or

·5· really slows down how much they can correct.· But

·6· it's significant, and it comes up quite often.

·7· · · · · · Our largest long-term care insurer,

·8· Genworth, they are, as you may know, contemplating a

·9· merger with China Oceanwide.· And our Commissioner

10· has been very active in looking at the SEC filings

11· and looking at some of the parameters around that

12· deal.· And the increases that have been pursued by

13· Genworth have been on hold until there is more

14· information, there is more questions answered about

15· that, that deal.· That's another example.

16· · · · · · In the past six months in the actuary's

17· office we are scrutinizing filings.· We are trying

18· to build our own models, improve our own models.

19· · · · · · We've had, for example, nine insurers

20· submit an average increase of 36 percent.· That's

21· not just in one year.· It's not just a cap.· And the

22· average approved has been 11.5.

·1· · · · · · It's more than in the past, and we are

·2· trying to work more with carriers to make sure that

·3· balance is there.· But it's not that the filings are

·4· being taken in, we ask a few questions and we just

·5· approve it.· It's just not the facts.

·6· · · · · · A lot of times the insurers of their own

·7· volition have -- again how are they held to account,

·8· have priced to a lifetime loss ratio of 100 percent.

·9· Meaning if they take in a dollar of premium, they

10· have agreed to pay a dollar of claims.· No profit.

11· Some have done that on their own.· Not all.· And

12· that's another aspect of what's been done.

13· · · · · · In Annapolis, there are always many bills

14· about long-term care.· One that came up this last

15· session was to if you have a contingent benefit upon

16· lapse, explore crediting interest on the premiums

17· earned.· That was agreed to be examined further.

18· But it's just an example of those bills put forward

19· to get attention in Annapolis to what can be done.

20· · · · · · So, lastly what -- what will we do.· Some

21· of the ideas that were put forward by some of the

22· public comments and ones that have come up in

·1· Annapolis before, are what if you exclude increases

·2· for people over 75.· Again just an idea.· It needs a

·3· lot of vetting, but we will explore every idea.

·4· · · · · · What about if you get an increase, you

·5· don't get another increase for five years.· Ideas.

·6· But if you're age 75 and you've had the policy for

·7· 10 years, how about no more rate increases.

·8· · · · · · Not all of these work.· And it's

·9· difficult for a business that entered a market to

10· change the rules after the fact.· But for new

11· business trying to at least put ideas out there to

12· conjure other thoughts.

13· · · · · · And lastly when we scrutinize the

14· filings, there is in some ways two camps, in some

15· cases again the company is already in a bad

16· situation.· They are in duration 15 for example, and

17· they expected to be paying 50 cents on the dollar of

18· premium, and they are paying 110.· That's one

19· situation where it's clear, and we try to work with

20· them to gradually get on a path to find balance.

21· · · · · · There is other situations where it's very

22· assumption driven and -- as the nature of long-term

·1· care is, and the financial losses won't come for ten

·2· years, five years.· And those we look a little

·3· closer and we try to understand the seriatim models

·4· that the carriers have.

·5· · · · · · So, I appreciate again comments.· They

·6· are helpful to us to get another vantage point. I

·7· hope we have spoken to them a bit.· And I will turn

·8· back to Nancy to moderate and try to answer any

·9· other questions later.

10· · · · · · COMMISSIONER GRODIN:· Thanks, Todd.

11· Anyone else?· Okay.· All right.· Then we can start

12· with the John Hancock Life Insurance Company,

13· Mr. Plumb.

14· · · · · · MR. PLUMB:· Good morning, everybody.

15· Thank you, Deputy Commissioner Grodin and your staff

16· for providing us the opportunity to participate in

17· this important hearing today.

18· · · · · · My name is David Plumb, and I'm vice

19· president of actuary at John Hancock, responsible

20· for the in force pricing of our long-term care.

21· · · · · · John Hancock first issued long-term care

22· insurance in 1987.· Long-term care services can cost

·1· hundreds of thousands of dollars, and this can

·2· easily deplete someone's saving and then some.

·3· · · · · · Pooling an individual's risk with others

·4· through insurance is much more affordable than

·5· trying to earmark savings to cover the potential

·6· costs.

·7· · · · · · We have an outstanding filing with the

·8· MIA for a policy form that was sold in Maryland from

·9· 2007 through 2011 where we requested a premium

10· increase of 15 percent.· This will impact about 1200

11· Maryland insureds, and this plan has not had any

12· prior rate increase.

13· · · · · · Our original requested increase on this

14· plan was about 27 percent, but we reduced to

15· 15 percent to satisfy the annual limit in Maryland.

16· We expect to file for the remaining amount next year

17· with the total of the increase being a little bit

18· more than the 27 percent due to the timing of the

19· implementation.

20· · · · · · We are not trying to recover any past

21· losses in our filings.· The increases are needed to

22· cover projected future losses.· So, I want to

·1· explain why we need these premium adjustments.· So,

·2· long-term care insurance is a very long duration

·3· product where people buy in their 50s and most claim

·4· in their 80s.· And long-term care uses and expenses

·5· are difficult to predict for many decades into the

·6· future.

·7· · · · · · Writers of this important product need to

·8· be able to adjust premiums to reflect emerging

·9· experience.· If this was not structured as a

10· guaranteed renewable product, which gives companies

11· that ability, and companies couldn't raise their

12· rates to reflect experience, it's highly unlikely

13· that any carrier would have ever sold this type of

14· insurance.

15· · · · · · That would have resulted in millions more

16· people spending virtually all of their savings on

17· care costs and then relying on strained Medicaid

18· programs for their care after depleting their

19· assets.

20· · · · · · Most of the earlier premium increases in

21· the industry were due to lower than expected

22· voluntary lapses.· Current premium increases are

·1· more driven by claims and mortality experience.

·2· This is still a relatively young industry, and many

·3· companies have just recently started to get a

·4· significant amount of claims experience at the older

·5· ages and later policy durations which is where the

·6· vast majority of claims are expected to happen.

·7· · · · · · At John Hancock we are seeing more people

·8· than expected living to older ages where long-term

·9· care events happen.· And we are seeing a higher rate

10· of claims than expected and longer lasting claims

11· than expected for those who do make it to the older

12· ages and after the effects of underwriting have worn

13· off.

14· · · · · · I would like to point out that our

15· experience on this particular form is actually a

16· little bit better than expected so far.· But this

17· form is fairly new, and so far we've only paid about

18· 4 percent of the claims that we ultimately expect to

19· pay.

20· · · · · · As I mentioned earlier, where our claims

21· are worse than expected are at the older ages and

22· later policy durations.· We have very little

·1· business in that area on this particular form.· But

·2· we do have a lot of business in that area on our

·3· older similar policy forms.

·4· · · · · · We're using that information on our older

·5· forms to act earlier on this form.· Waiting until

·6· the adverse experience emerges on this form alone

·7· would result in a much larger increase needed.

·8· · · · · · As an example, the 27 percent that we

·9· need now, if we were to wait ten years more in order

10· for the adverse experience to emerge on this form,

11· it would be 65 percent rather than 27 percent.

12· · · · · · With this plan we are not able to offer

13· our future inflation reduction landing spot, because

14· that's only available for plans with a fixed

15· inflation whereas most of these plans have inflation

16· that's linked to the CPI index and others have a

17· guaranteed purchase option.

18· · · · · · We do offer the typical benefit reduction

19· option such as reducing your daily benefit maximum

20· or shortening the benefit period.

21· · · · · · So, thank you again for allowing me to

22· address our current filing, and I would be happy to

·1· answer any questions you may have.

·2· · · · · · COMMISSIONER GRODIN:· Thank you,

·3· Mr. Plumb.· Any questions from MIA staff?

·4· · · · · · MR. SWITZER:· Thank you, Dave.· One of

·5· the ideas that have been put forward that we

·6· understand some insurers have adopted are exempting

·7· policyholders over age 75 from rate increases.· I'm

·8· not asking for anything definitive, but is that

·9· something that off the bat is a nonstarter or that

10· can be considered from your standpoint?

11· · · · · · MR. PLUMB:· I think a couple of problems

12· with that are, so, long-term care is a -- rates have

13· to be increased on a class of business.· You can't

14· single out people for a rate increase, like

15· unhealthy people will have a rate increase versus

16· healthy.· It has to be based on a premium class.

17· · · · · · And a premium class has never been

18· defined has obtained age, it's always issue age,

19· benefit period, inflation option, and underwriting

20· class.

21· · · · · · The second potential issue with that is

22· that it may be discriminatory particularly if the

·1· company is -- if you're not going to be able to

·2· raise rates above a certain age, then that means you

·3· have to raise rates more for people below that age,

·4· then those people are paying more than they should

·5· while others are paying less than they should.

·6· · · · · · So, I think there is discriminatory

·7· issues there, and then the whole language around

·8· rating class makes that question moot.

·9· · · · · · MR. SWITZER:· Second, so -- thanks. I

10· understand that what you filed effects 1,200 of your

11· members in Maryland which is about 5 percent of your

12· total Maryland members.· And you mentioned that

13· mortality is the key assumption.

14· · · · · · MR. PLUMB:· Morbidity as well, Todd.

15· · · · · · MR. SWITZER:· Okay.· For this particular

16· 5 percent subset if you had to pick one assumption

17· that's the main driver, could you just -- is it

18· morbidity?

19· · · · · · MR. PLUMB:· I think for this particular

20· one it's morbidity.· I'm just not sure, but I am

21· fairly certain it's morbidity.

22· · · · · · MR. SWITZER:· Thank you.

·1· · · · · · MR. PLUMB:· You're welcome.

·2· · · · · · MR. MORROW:· Let me ask you real quick.

·3· Does your answer to Todd's first question change if

·4· the General Assembly sides as a matter og policy

·5· they want to put in that 75 year old age level?

·6· · · · · · MR. PLUMB:· I'm not a lawyer.· I wish I

·7· was sometimes.· But I don't know if there is a

·8· determinatory issue and the General Assembly has

·9· said it's okay to discriminate, does that leave the

10· company off the hook for discrimination lawsuits. I

11· don't know the answer to that.

12· · · · · · MR. MORROW:· I'm thinking in terms of the

13· numbers.· I'm not asking about that.

14· · · · · · MR. PLUMB:· I'm sorry, I don't

15· understand.· So, the issue of not raising rates for

16· people above a certain age and raising rates more

17· for people below that age?

18· · · · · · MR. MORROW:· Right.· Does that --· does

19· that actually help the experience?

20· · · · · · MR. PLUMB:· If there were no

21· discriminatory issues, I think that would be fine

22· except for when a company only has people above a

·1· certain age, it could be devastating for them.· And

·2· some of the older companies that are in dire straits

·3· probably are more in that situation where they

·4· couldn't get any rate increases.

·5· · · · · · MR. MORROW:· Okay.· Thank you.

·6· · · · · · COMMISSIONER GRODIN:· Thank you,

·7· Mr. Plumb.

·8· · · · · · We now have Massachusetts Mutual Life

·9· Insurance Company, Mr. Fawthrop.· You have to spell

10· that for the Court Reporter.

11· · · · · · MR. FAWTHROP:· Good morning.· My name is

12· Roland Fawthrop F-A-W-T-H-R-O-P.· I'm senior actuary

13· at Massachusetts Mutual Life Insurance Company,

14· MassMutual, responsible for the health product lines

15· which include our individual long-term care

16· insurance products, which is marketed under the name

17· Signature Care.

18· · · · · · On behalf of MassMutual, thank you for

19· the opportunity to discuss MassMutual's request for

20· in-force premium increases for our closed block of

21· individual long-term care insurance policies.

22· · · · · · Before discussing our request, I want to

·1· first provide a brief background on MassMutual's LTC

·2· business.

·3· · · · · · MassMutual, a mutual life insurance

·4· company, established in 1851 in Springfield,

·5· Massachusetts, began selling long-term care

·6· insurance in 2000 with our Senior Signature Care 200

·7· series.

·8· · · · · · Since releasing that first product,

·9· MassMutual has introduced five subsequent series -

10· Signature Care 300, 400, 500, 511, and 513.· Our

11· closed block which is the subject of this pending

12· premium rate increase request includes the Signature

13· Care 200, 300 and 400, 500 and 511 series.

14· · · · · · I would also like to note that despite

15· other companies ceasing sales of their products,

16· MassMutual remains one of those companies committed

17· to selling individual long-term care insurance as we

18· continue to market the 513 series for new sales and

19· are in the process of filing our next series,

20· Signature Care 600.

21· · · · · · As a business we closely monitor current

22· and emerging market and regulatory conditions as

·1· well as our own and the industry's claims experience

·2· to insure that the policy features and rates align

·3· to meet today's and tomorrow's maturing population.

·4· · · · · · Consistent with what other carriers have

·5· found, our emerging and expected experience is

·6· running more adverse than previously expected.· More

·7· specifically as described in our filing, lower

·8· mortality and lapse rates result in a much larger

·9· pool of expected LTC claims, and higher morbidity

10· which is from a combination of higher than expected

11· incidence rates and lower -- longer claims durations

12· result in significantly higher expected claims

13· files.

14· · · · · · While lower interest rates have a

15· meaningful impact, the biggest drivers of the

16· difference in expected experience are mortality and

17· morbidity.· Given these factors, our company's

18· senior leadership made the difficult decision to

19· file for premium rate increases.· This is the first

20· LTC rate increase request ever made by MassMutual.

21· · · · · · These premium rate increases are intended

22· to mitigate losses expected to emerge in the future.

·1· They are not to recover any past losses already

·2· incurred.

·3· · · · · · In total MassMutual currently has over

·4· 73,000 long-term care insurance policies in force

·5· nationally covering about 90,000 insureds as some

·6· policies were issued as joint coverage.

·7· · · · · · About 54,000 policies or 70,000 insureds

·8· are subject to our nationwide rate increase request.

·9· Of that amount, there are approximately 2,700

10· policies or 3,700 insureds in force in Maryland.

11· · · · · · The premium increases that MassMutual has

12· filed nationwide are set to achieve a rate level

13· consistent with that on our currently marketed

14· 513 series.

15· · · · · · The filed increases vary by rate series

16· and all available options and riders.· Individual

17· policy rate increases are then capped at one hundred

18· percent.

19· · · · · · Recognizing Maryland's 15 percent

20· regulatory cap on increases, MassMutual initially

21· requested a multi year phased-in rate increase such

22· that no policy owner would receive a rate increase

·1· more than 15 percent in any single calendar year.

·2· · · · · · The cumulative rate increase would then

·3· be capped at 145 percent on each individual policy,

·4· which is the actuarial equivalent of the nationwide

·5· request.

·6· · · · · · At the request of the Maryland Insurance

·7· Administration, we've amended our filing to limit

·8· this request to just one rate increase capped at

·9· 15 percent.· We believe the rate increase is both

10· justified and needed.

11· · · · · · We anticipate filing additional premium

12· rate increases in the future in order to bring

13· Maryland premium rates on par with the nationwide

14· rate level.

15· · · · · · Next I will spend a few minutes

16· discussing MassMutual's communication plan which was

17· designed to be as transparent as possible with

18· policy -- policy owners, producers, and insurance

19· regulators.· We know that this is a priority for

20· Commissioner Redmer and the MIA.

21· · · · · · Prior to our initial premium increase, we

22· engaged with State regulators including Maryland to

·1· make you aware of the filing and communication plans

·2· in advance of any anticipated media coverage.· We

·3· also engaged with our producers so that they would

·4· be prepared to respond to policy owner questions.

·5· · · · · · Lastly we want policy owners subject to

·6· the rate increase request to hear this news directly

·7· from the company and not from the media, word of

·8· mouth or an individual publication.

·9· · · · · · As such we sent a letter to our policy

10· owners notifying them of the potential rate increase

11· on their long-term care policy.

12· · · · · · Once we have regulatory approval and have

13· implemented the new premium rates in our

14· administrative systems, the company will send a

15· formal increase notification approximately 90 days

16· prior to the effective date of any rate increase

17· with a list of options available to impacted policy

18· owners.

19· · · · · · The 90 day notification period is meant

20· to provide policy owners time to consider their

21· individual circumstances and options available to

22· them, and to make sound, informed decisions about

·1· their coverage.

·2· · · · · · MassMutual is sensitive to the impact

·3· that rate increases may have on policy owners.

·4· Policy owners effected by the premium increase will

·5· have the option of reducing their policy benefits to

·6· provide flexibility of choice for those who wish to

·7· maintain a premium level similar to what they were

·8· paying prior to the rate increase.

·9· · · · · · The benefit reduction options available

10· to policyholders to mitigate the proposed rate

11· increase may include reducing the daily benefit

12· amount, extending the elimination period, reducing

13· the benefit period, reducing the amount of inflation

14· protection and/or removing optional riders.

15· · · · · · MassMutual has requested to voluntarily

16· offer a contingent benefit upon lapse to all

17· insureds affected by the premium increase, even if

18· the increase is not considered substantial.

19· · · · · · In closing, MassMutual understands that

20· the rate increase request is neither popular or

21· ideal.· However in being transparent and empathetic

22· to both our policyholders and to you, the regulator,

·1· MassMutual hopes to make this process as smooth as

·2· possible.

·3· · · · · · Thank you for allowing me to participate

·4· in today's hearing.· I am happy to answer any

·5· questions you have.

·6· · · · · · MR. SWITZER:· Thanks very much.· It's a

·7· little bit of a variation of the question that I

·8· asked Mr. Plumb, the idea of exempting someone, a

·9· policyholder who is age 75 or older and has had a

10· policy for 10 years or more, understanding if you

11· echo John Hancock's concerns, I would be interested

12· in that.

13· · · · · · But barring the legal issues for the time

14· being, actuarially would this variation, reducing

15· the actuarial impacts somewhat, comments on the

16· feasibility of the idea or perhaps a modification of

17· the idea, please.

18· · · · · · MR. FAWTHROP:· So, I do echo the comments

19· from John Hancock.· The contribution principle which

20· is an actuarial bedrock includes making sure that

21· you are not shifting the cost from one group to

22· another group.

·1· · · · · · I am not an attorney, but I do have some

·2· similar concerns about potential litigation that

·3· would follow that.· And there would likely -- if

·4· you're not -- if you're capping coverage or

·5· increases above a certain age, 75, 80, whatever that

·6· age may be, there will be an affect on -- with some

·7· companies that they will have to pass that increase

·8· onto other policyholders.

·9· · · · · · I don't have a great solution at hand for

10· that right now.

11· · · · · · MR. SWITZER:· I appreciate that.· How

12· about the new planning on your Signature 600, what

13· if your brand new plan you knew up front that was a

14· policy feature theoretically?

15· · · · · · MR. FAWTHROP:· If that's a policy feature

16· theoretically and is something that we could build

17· into the policy form, that protects us much better

18· than doing something where we may be exposed.

19· · · · · · MR. SWITZER:· Right.· Last question.· So,

20· as you aligned, 3,700 Maryland members affected by

21· the filing you have with us.· That's about 80

22· percent of your total Maryland block.

·1· · · · · · You mentioned that the rate increase is

·2· not to recoupe any past losses.· One of the unique

·3· things that I noticed in looking at the Form 5, the

·4· financial statements, is that for all of Maryland's

·5· business, MassMutual's business in Maryland, the

·6· loss ratio so far I think through duration of '17,

·7· it's 14 percent.· Nationwide it is 14 percent.

·8· · · · · · I see for these forms, the 80 percent

·9· subset, the loss ratio so far is 10 percent.· By our

10· models we expect it to be 30 to 40 percent.

11· · · · · · So, I'm just -- have you incurred losses

12· so far?· Are you -- are there past losses to recoup

13· so far?

14· · · · · · MR. FAWTHROP:· The -- it's a great point.

15· There are not material losses in the past.· What

16· happens with the loss ratios when you have

17· significantly lower lapse rates and mortality rates,

18· is there is a much larger pool of people than you

19· anticipated.

20· · · · · · MR. SWITZER:· Right.

21· · · · · · MR. FAWTHROP:· That pool in the early

22· years is paying premium which will drive your early

·1· duration lapse loss ratios down, but has a

·2· significantly negative impact on those long-term

·3· loss ratios.

·4· · · · · · So, most of the -- the need, I'd say

·5· almost all of the need for the premium rate increase

·6· is from what we expect to happen in the future.

·7· · · · · · MR. SWITZER:· Thanks very much.

·8· · · · · · MR. MORROW:· I just want to make sure I'm

·9· clear about one thing.· You mentioned this is the

10· first rate increase request ever by MassMutual.

11· · · · · · MR. FAWTHROP:· That's correct.

12· · · · · · MR. MORROW:· Nationwide, not just in

13· Maryland?

14· · · · · · MR. FAWTHROP:· That's correct.

15· · · · · · MR. MORROW:· And just I assume this is

16· going to come up later so I'm just going to ask it

17· now, have you ever considered not paying dividends

18· or not paying as large a dividend, and taking some

19· of that money to use it to cover some of the

20· long-term care expected experience or losses later?

21· · · · · · MR. FAWTHROP:· So, even with this premium

22· rate increase that we are asking for, the loss

·1· ratios are still well -- nationwide increase are

·2· still well above a hundred percent.· So, our

·3· participating policyholders, if we were to even

·4· receive the full nationwide request, would still be

·5· sharing a significant piece of the claims experience

·6· in the future.

·7· · · · · · That said Massachusetts Mutual is a

·8· participating policy owned company.· And to what

·9· extent should all of our in-force policyholders pay

10· for the significant increase in claims cost for a

11· particular block?· Should they pay for all of it, a

12· part of it?

13· · · · · · So, there was a lot of discussion about

14· that.· And we thought we had ended up with an

15· equitable decision.

16· · · · · · MR. MORROW:· So, it has been discussed.

17· · · · · · MR. FAWTHROP:· It has been.

18· · · · · · MR. MORROW:· Okay.· Very good.· Thank

19· you.

20· · · · · · MR. ZIMMERMAN:· Just one question for you

21· regarding the assumptions, I see that Milliman, you

22· worked with Milliman on the filing.

·1· · · · · · MR. FAWTHROP:· Yes.

·2· · · · · · MR. ZIMMERMAN:· So, what percentage -- is

·3· there any credibility with actual company experience

·4· for the assumptions, or are all they Milliman based?

·5· · · · · · MR. FAWTHROP:· The assumptions are

·6· Milliman based, but they did use our experience and

·7· there was credibility as to the experience.

·8· · · · · · MR. ZIMMERMAN:· Okay.· Thank you.

·9· · · · · · COMMISSIONER GRODIN:· If I could just

10· confirm, did you say that you had sent a letter to

11· your policyholders already in anticipation?

12· · · · · · MR. FAWTHROP:· Yes.· We first filed for a

13· rate increase I believe it was on May 20th in the

14· Commonwealth of Massachusetts, which is our

15· domiciliary state.· That was on Monday.· By Friday

16· of the same week we had sent -- mailed the letter to

17· all of our 54,000 policy owners letting them know

18· that we're beginning this process.· And -- and that

19· they could call into our administrative office with

20· any questions and also work with their producer to

21· answer any questions but that it was going to be a

22· lengthy process.

·1· · · · · · We did not want them to hear about that

·2· from an outside source.· We wanted to be as

·3· transparent as we could with the policyholders.

·4· · · · · · COMMISSIONER GRODIN:· Thank you,

·5· Mr. Fawthrop.

·6· · · · · · Next up we have MedAmerica Insurance

·7· Company, Mr. Kinney.

·8· · · · · · MR. KINNEY:· Good morning, Deputy

·9· Commissioner Grodin, Mr. Switzer, Administration and

10· guests.· Thank you for the opportunity to appear

11· regarding our long-term care premium rate increase

12· filing.

13· · · · · · My name is Patrick Kenny.· I'm the

14· manager and actuary for LTC pricing at MedAmerica

15· Insurance Company.· MedAmerica sold standalone

16· long-term care policies nationwide in 1987 through

17· early 2016.

18· · · · · · Although the company ceased sales at that

19· time, we remain committed to provide promised LTC

20· benefits to over 100,000 people across the country

21· including almost 400 in Maryland who rely on us to

22· continue their coverage long into the future.

·1· · · · · · Adverse experience in policy persistency

·2· and morbidity and interest earnings threatens the

·3· financial health of the LTC industry.

·4· · · · · · MedAmerica is a monoline LTC company with

·5· no other insurance products to offset projected

·6· shortfalls from long-term care coverage.· We believe

·7· the premium rate increases are necessary now to

·8· insure our ability to pay LTC claims in the long

·9· term.

10· · · · · · We need to place our closed block LTC

11· products on a sound financial footing for the

12· future.· Today's hearing concerns our requested 4.2

13· percent premium rate increase on our "Simplicity ii"

14· product.

15· · · · · · This policy form was issued in Maryland

16· from June 2008 through April 2014 covering 140

17· insureds in the state.

18· · · · · · Our current request is a follow-up to a

19· 15 percent rate increase filed by the Maryland

20· Insurance Administration in December 2015 and the

21· 4.3 percent increase submitted in March 2017 and

22· filed in January of this year.

·1· · · · · · If accepted by the Administration, the

·2· current 4.2 percent request will bring the

·3· cumulative rate increase in Maryland up to the

·4· 25 percent increase that MedAmerica determined to be

·5· necessary to certify to rate stability on this

·6· policy form.

·7· · · · · · Implementation of this rate increase will

·8· take place no earlier than one year after

·9· implementation of the prior increase, so that no

10· policyholder will receive more than one rate

11· increase within 12 months.

12· · · · · · Since the time of our 2015 and 2017 rate

13· increases, MedAmerica has updated its actuarial

14· assumptions for morbidity and persistency, including

15· two years of additional claims experience.· And we

16· actually increased our interest assumption from 4.5

17· percent to 5.0 percent which is closer to the 5.25

18· percent assumed in the original pricing increase of

19· the product.

20· · · · · · The net effect of these assumptions is

21· that the projected lifetime loss ratio prior to any

22· rate increases has not changed significantly from a

·1· prior filing.· Deterioration in other actuarial

·2· assumptions was offset by the change in the interest

·3· rate due to the company's revised future investment

·4· policy.

·5· · · · · · We concluded that the original 25 percent

·6· cumulative rate increase remains appropriate, and

·7· the current request for a 4.2 rate increase to take

·8· effect in 2019 will bring us to that level.

·9· · · · · · Similar to prior increases, MedAmerica is

10· offering insureds affected by the premium increase

11· the option of reducing their policy benefits to

12· provide flexibility of choice for those insureds who

13· wish to maintain the premium level similar to what

14· they were paying prior to the rate increase.

15· · · · · · Furthermore MedAmerica is offering

16· contingent nonforfeiture benefit to all insureds

17· affected by the rate increase which means the

18· policyholder who lapses premium payments due to the

19· requested rate increase remains eligible to receive

20· some level of paid-up benefit in the future.

21· · · · · · To help consumers navigate their options

22· to continue premium payments, accept a reduced

·1· paid-up CNF benefit or find a benefit reduction

·2· option that best suits them, our insureds are

·3· encouraged to call our toll free customer service

·4· phone number.· Because each policyholder is unique,

·5· MedAmerica works with each person individually.

·6· · · · · · MedAmerica takes pride in providing

·7· quality claims service to our insureds.· 95 percent

·8· of claimants surveyed rate their experience with

·9· MedAmerica as above average or excellent.· And our

10· average time to pay a claim is six days or less.

11· · · · · · We believe this service excellence is a

12· critical component to fulfilling our promises of

13· taking care of our insureds, and we plan to continue

14· to provide this level of service going forward.

15· · · · · · In closing, I would like to reiterate

16· that despite the fact that we no longer sell

17· long-term care insurance, MedAmerica remains

18· committed to delivering on all of our promises to

19· our customers.

20· · · · · · Granting actuarially justified rate

21· increases will help assure we have the financial

22· strength to continue providing the benefits and

·1· service our insureds expect and desire.

·2· · · · · · Thank you for your time and

·3· consideration.· I am happy to answer any questions

·4· at this point.

·5· · · · · · COMMISSIONER GRODIN:· Thank you,

·6· Mr. Kinney.

·7· · · · · · MR. SWITZER:· Thanks very much.· So, I

·8· gather that the 140 members, Maryland members that

·9· your current submission applies is about 28 percent

10· of your total Maryland members, something like that?

11· · · · · · MR. KINNEY:· We have about 400 in

12· Maryland.

13· · · · · · MR. SWITZER:· I also -- to get context

14· that so far these members have lifetime had an

15· increase of about 19.9 percent.· You want to get up

16· to the 26 or --

17· · · · · · MR. KINNEY:· 25.

18· · · · · · MR. SWITZER:· 25.· So, my question is,

19· enrollments at 140, you stated it's a closed block,

20· can only decline obviously.· Roughly estimate that

21· the 4.2 percent that was requested would represent

22· about $15,000 in additional revenue per year.· Is

·1· there a diminimus level where enrollment maybe

·2· reaches below a hundred or below 50 where maybe

·3· it's -- the increases aren't -- aren't worth all the

·4· filing just because you've got to such low numbers?

·5· It's just something that has come up before, and I'm

·6· curious as to your thoughts.

·7· · · · · · MR. KINNEY:· For us that number would be

·8· well below a hundred.· More like single digit

·9· policyholders before we consider not submitting as

10· part of a nationwide rate increase.

11· · · · · · MR. SWITZER:· As part of the nationwide.

12· Okay.· Thank you.

13· · · · · · COMMISSIONER GRODIN:· I'm just curious,

14· you may have mentioned this, do you know the average

15· age of your policyholders in Maryland?

16· · · · · · MR. KINNEY:· I don't have that statistic.

17· · · · · · COMMISSIONER GRODIN:· Okay.· Thank you --

18· or, I'm sorry.

19· · · · · · MR. ZIMMERMAN:· I was looking at the

20· filing, and we're at an average duration of 8, 9

21· approximately for this policy series.· I noticed

22· that the AD loss ratio for the cumulative loss ratio

·1· is about 1.6.· You expect that at this time to be

·2· about 5 percent, the actual loss ratio is 8 percent.

·3· So, I'm just wondering if there has been any

·4· analysis done to determine what has caused this at

·5· such an early duration.

·6· · · · · · MR. KINNEY:· In this case it's mostly

·7· persistency.· And since our last study, we've

·8· updated our morbidity assumptions as well.· That's

·9· contributed a little bit to the deterioration.· You

10· can see that the claims --

11· · · · · · THE REPORTER:· Speak up.

12· · · · · · MR. KINNEY:· The claims in the last two

13· years, the actual experience has been worse than

14· projected and two years ago as well.

15· · · · · · MR. ZIMMERMAN:· Thank you.

16· · · · · · COMMISSIONER GRODIN:· Thank you very

17· much.· All right.· Next we have Senior Health

18· Insurance Company of Pennsylvania.· Mr. Anderson.

19· · · · · · MR. ANDERSON:· Good morning.· I would

20· like to thank Deputy Commissioner Nancy Grodin and

21· her staff and the others with Maryland Insurance

22· Administration for giving me the opportunity to

·1· speak on behalf of Senior Health Insurance Company

·2· of Pennsylvania, otherwise known as SHIP.

·3· · · · · · My name is Duane Anderson.· I'm

·4· responsible for the rate increase effort at SHIP as

·5· well as supporting functions including IT and

·6· operations.· We work closely together to evaluate

·7· whether SHIP's current premium rates are an accurate

·8· reflection of anticipated future claims based on

·9· actuarial projections.

10· · · · · · Milliman is our partner in the actuarial

11· work.· In the past years they have been here with us

12· at this meeting.· Today they couldn't be here.

13· · · · · · My plan today is to provide a brief

14· company history, the rate increases SHIP is seeking,

15· and alternative options to the rate increases.

16· · · · · · To be sure, SHIP is aware of the extreme

17· difficulty these rate increases put upon

18· policyholders and continues to explore ways to

19· mitigate the necessary rate increases.

20· · · · · · I would like to start with a brief

21· company history.· SHIP was formed in 2008.· It's

22· legacy business consists of long-term care blocks

·1· from American Travellers and Transport Life

·2· Insurance Company which merged in 1998 and became

·3· Conseco Senior Health Insurance Company.

·4· · · · · · In 2008 the company was transferred to

·5· Senior Health Care, an oversight trust.· The trust

·6· was given the responsibility to take ownership of

·7· SHIP and oversee the runoff of its closed blocks of

·8· long-term care insurance.

·9· · · · · · The trust and SHIP operate exclusively

10· for the benefit of the policyholders, and we seek to

11· maintain solvency through the remaining life of the

12· company so that all obligations to policyholders may

13· be met.

14· · · · · · SHIP exists for the sole purpose of

15· meeting long-term care policyholder needs.· We

16· operate without a profit motive, and we will never

17· attempt to recover past losses.

18· · · · · · The trust is controlled by four former

19· Commissioners of Insurance and the former president

20· of the Society of Actuaries.

21· · · · · · When SHIP was formed in 2008, there were

22· 150,000 active policyholders on policies written

·1· between the late '70s and 2003.· Today there are

·2· 57,000 total active policyholders across the states.

·3· · · · · · In Maryland 4,300 policies were

·4· originally written on 20 policy forms.· Today there

·5· are 1,092 active policyholders in Maryland.· Again I

·6· believe the denominator is 214, I heard earlier in

·7· the presentation.

·8· · · · · · SHIP's decision to file for rate

·9· increases was made after in-depth analysis of the

10· experience relating to policies that are the subject

11· of these filings.

12· · · · · · SHIP has filed for these increases in

13· light of the information that has emerged over the

14· years these policies have been in force, including

15· claims experience and persistency.

16· · · · · · Projected claims are higher than

17· expected, compounded by persistency which is higher

18· than expected.· We are requesting a 15 percent rate

19· increase capped due to the Maryland limit on

20· policies with a 5 percent compounded inflation

21· benefit with unlimited duration.

22· · · · · · For Maryland this impacts all 1,092

·1· policyholders.· In our standing rate filing SHIP has

·2· shown we were able to justify a multiple over

·3· 100 percent premium rate increase in Maryland.· SHIP

·4· is not seeking that higher rate.· However, we will

·5· need to continue to file rate increases in Maryland

·6· due to the rate cap of 15 percent.

·7· · · · · · Given the rate increases necessary, in an

·8· effort to provide policyholder options to retain

·9· benefits under their policies, SHIP has proposed a

10· variety of options for the policyholders to mitigate

11· the rate increase.

12· · · · · · Under the first option, SHIP is offering

13· our policyholders to drop their inflation going

14· forward while maintaining their current accumulated

15· benefits, with a reduction of premium of 40 percent.

16· This means the current daily benefit amount will

17· remain constant in the future.

18· · · · · · Additionally SHIP is offering an

19· opportunity for a 30 percent premium reduction in

20· exchange for an increase in the elimination period

21· zero to 110 days.

22· · · · · · SHIP is also offering policyholders the

·1· ability to select a nonforfeiture option and avoid

·2· paying any future premiums.· Under this option, SHIP

·3· will pay for the eligible expenses up to the total

·4· premium that's been paid to-date less any benefits

·5· that have been paid on the policy thus far.

·6· · · · · · Finally, policyholders can select other

·7· options of reduced benefits such as benefit periods

·8· and daily benefit amounts in an effort to reduce or

·9· keep premiums at their current rates.

10· · · · · · As mentioned SHIP understands the

11· challenges rate -- challenges rate increases have on

12· our policyholders.· However, rate increases are

13· needed to help insure future premiums will be

14· adequate to fund the anticipated claims.

15· · · · · · We actively manage and monitor the

16· performance for our business updating actuarial

17· studies on an annual basis to make sure we will be

18· able to be there when our policyholders needs us

19· most which is at the time of claim.

20· · · · · · We will continue this dedication in the

21· future.· To restate, the trust and SHIP operate

22· exclusively for the benefit of policyholders, and we

·1· seek to maintain solvency through the remaining life

·2· of the company so that all obligations of

·3· policyholders may be met.

·4· · · · · · I would like to thank everyone for

·5· participating today for their time and attention,

·6· and we're happy to take questions from the Maryland

·7· Insurance Administration now.

·8· · · · · · COMMISSIONER GRODIN:· Thank you,

·9· Mr. Anderson.

10· · · · · · MR. SWITZER:· Thanks again.· So, I see

11· that your situation is a little different in that

12· from the Form 5 lifetime loss ratio in Maryland is

13· 103 percent.· So, you're paying more in claims than

14· premium.· I recognize that.

15· · · · · · I just want to make sure that I

16· understand what you said, that I'm doing the math

17· right.· That I got that the lifetime increases on

18· this form so far have been 300 percent.· And that

19· your need, as you calculated it, is 100 percent.

20· So, you will need to keep the -- the company sees

21· themselves needing to keep filing 15s until you --

22· to get a lifetime increase of about 400 percent.

·1· · · · · · MR. ANDERSON:· Uh-huh.

·2· · · · · · MR. SWITZER:· Thanks.

·3· · · · · · COMMISSIONER GRODIN:· Thank you,

·4· Mr. Anderson.

·5· · · · · · MR. ANDERSON:· Thank you.

·6· · · · · · COMMISSIONER GRODIN:· That concludes the

·7· portion of this program to hear testimony from the

·8· carriers.· I would like to turn now to the

·9· individuals who have signed up to speak on our

10· sheet.· The first one is Mr. Burgan.

11· · · · · · MR. BURGAN:· Good morning, everyone.· My

12· name is Elwood Barry Burgan.· I am a policyholder.

13· I'm not an attorney; I'm not an insurance agent.

14· But I am policyholder.

15· · · · · · THE REPORTER:· Hold it closer.

16· · · · · · MR. BURGAN:· Is a fellow by the name of

17· Ben Bigalo (phonetic), is he still with your agency?

18· I spoke with Ben -- let's see.

19· · · · · · MR. MORROW:· Ben Legow?

20· · · · · · MR. BURGAN:· Pardon me?

21· · · · · · MR. MORROW:· Ben Legow.· L-E-G-O-W.

22· · · · · · MR. BURGAN:· Hold on.· Hold on a second.

·1· I have it here.· I have his name here.· It has to do

·2· with my wanting to know why the Section 11-704 by

·3· the Maryland Insurance Code has -- is allowing these

·4· insurance companies to increase my rate or anyone's

·5· rate an additional 15 percent per year.

·6· · · · · · Now in calling down to the agency, Ben

·7· Legow, I'm sorry, L-E-G-O-W.· (Inaudible.)

·8· · · · · · THE REPORTER:· You've got to put it to

·9· your mouth so I can hear.

10· · · · · · MR. BURGAN:· Is Ben Legow still here?

11· · · · · · MR. MORROW:· He's not.

12· · · · · · MR. BURGAN:· He's not.· Thank you. I

13· also spoke with -- because I have a letter on his

14· behalf, and it states that if -- that I was not to

15· have an increase bestowed upon me this year, but yet

16· I received a letter stating from CNA that I have

17· been increased the 15 percent as authorized by MIA.

18· · · · · · Now, I also called and spoke with -- is

19· there a Mary Kwei here?· Is that how you --

20· · · · · · MS. KWEI:· Mary Kwei.

21· · · · · · MR. BURGAN:· Kwei, that's you.· Okay. I

22· spoke with you several times this past week, I

·1· believe in regards to my policy.· And it has to do

·2· with the age stipulation.· I even had my State

·3· Senator whom I contacted try to get a clarification

·4· on the age stipulation that's incorporated under

·5· your letterhead, MIA letterhead, stating that there

·6· can be increase up to -- up to -- up to the age of

·7· 75.

·8· · · · · · Now, it's clearly in writing here under

·9· your letterhead.· Up to means that I can be -- have

10· this increase to my policy but up to the age of 75.

11· I will be 75 next year.· So, even though I received

12· a letter from Ben Legow telling me that I wouldn't

13· be increased, I can substantially foresee the

14· increase to my policy at this time.

15· · · · · · But I am on a fixed income.· I'm a

16· disabled veteran.· I'm on a fixed income.· I cannot

17· continually afford 15 percent year after year after

18· year after year after year.· I just can't do it.

19· So, I need your help.

20· · · · · · As a veteran, it's the greatest country

21· in the world.· I fought for this country, and I'm

22· proud to say that I fought for this country.· But I

·1· need your help.· And I'm sure I'm not the only one

·2· that's in that category, that age category.

·3· · · · · · But again it clearly states in your

·4· letterhead up to the age of 75.· So, I employ you to

·5· help me.

·6· · · · · · I also had contacted the news media and

·7· left a message with -- with one of the news

·8· broadcasters concerning this matter.· And I have

·9· also consulted an attorney.· And I was told to ask

10· if this up to the age of 75 does not concur, then

11· where is it in writing that stipulates that it does

12· not incur.· Where I have it in writing here, where

13· is it that it's not to be.

14· · · · · · MR. MORROW:· So, Mr. Burgan, I don't know

15· the specifics of your case.· Obviously you talked to

16· Ben and Mary.· But I'm happy to talk with you with

17· Mary after -- after this hearing, and I'm happy to

18· look at the letter.

19· · · · · · MR. BURGAN:· Yeah.

20· · · · · · MR. MORROW:· Again --

21· · · · · · MR. BURGAN:· I can show it to you.· This

22· is evidence, however you want to do it.

·1· · · · · · MR. MORROW:· I'm happy to talk to you

·2· afterward.

·3· · · · · · MR. BURGAN:· Maryland Insurance

·4· Administration.

·5· · · · · · MR. MORROW:· I understand.· I understand

·6· your issue, and I hear you very clearly.· You

·7· cannot --

·8· · · · · · MR. BURGAN:· Please.· I need help.· I'm

·9· sure I'm not the only one, but I am a disabled

10· veteran.· I am on a fixed income, and I need your

11· help.

12· · · · · · MR. MORROW:· Very good.· And we will talk

13· when the meeting is over about your specific

14· situation.· I will be happy to look at the letter.

15· · · · · · MR. BURGAN:· Thank you for your time.

16· · · · · · MR. MORROW:· Thank you.

17· · · · · · COMMISSIONER GRODIN:· And next is Mr. --

18· it's either Huntman or Hutman.

19· · · · · · MR. HUTMAN:· Hutman.

20· · · · · · COMMISSIONER GRODIN: Hutman, thank you.

21· · · · · · MR. HUTMAN:· Thank you, Deputy

22· Commissioner Grodin, members of the MIA staff for

·1· the opportunity to talk to me.

·2· · · · · · My name is Ed Hutman.· I'm an insurance

·3· broker.· I represent a number of different

·4· companies.· I have placed policies with 10 different

·5· carriers since I started writing long-term care

·6· insurance in 1991.· I have well over a thousand

·7· Maryland clients many of whom will be affected by

·8· the outcome of today's hearing.

·9· · · · · · My wife and I are owners of two long-term

10· care policies - one purchased from CNA in 1991 and a

11· Genworth policy purchased in 2001.

12· · · · · · Since I last testified at a MIA hearing

13· in April of 2016, some things have changed for the

14· better, but unfortunately some have not.· I applaud

15· the MIA that it has taken steps to increase

16· transparency through these Statewide meetings and

17· information provided on the MIA website.· Both have

18· helped the consumer gain a better understanding of

19· what's happening to their policies when an

20· MIA-approved rate increases will occur, and for

21· those who have the background and who can understand

22· the filings, the company's perspective of why they

·1· think increase in premiums is warranted.

·2· · · · · · I'm happy for the transparency.· I hope

·3· it continues.· But the unaddressed question remains,

·4· why should poor performance numbers in large part

·5· caused by insurance company business errors made

·6· years ago be a policyholder problem?· This is the

·7· elephant in the room.

·8· · · · · · I assume that the data provided by the

·9· companies in their rate increase request filings are

10· correct.· If past history is any indicator, the MIA

11· will look carefully at the numbers, carefully

12· evaluate these numbers.· And if the numbers meet MIA

13· requirements, the rate increases will be approved.

14· · · · · · But what if the premise underlying the

15· numbers is false?· What if the numbers are

16· misleading?· How are adjustments for business errors

17· reflected in the numbers presented in the filings?

18· Sometimes numbers tell only part of the story.

19· · · · · · When one of two parties to an agreement

20· make a business mistake, which one should suffer the

21· consequences of that mistake?· It appears the answer

22· continues to be the Maryland consumer.

·1· · · · · · In the process used by MIA to determine

·2· whether increases should be granted, how are the

·3· companies held to account for poor business

·4· decisions they make?· What metric does the MIA take

·5· into consideration in weighing the extent to which

·6· underperformance of these policies is caused by

·7· business mistakes made by the insurance companies

·8· many years ago?

·9· · · · · · How are the companies held to account for

10· the errors they made in establishing overly

11· aggressive or inadequate underwriting standards and

12· pricing for the long-term care policies they sold?

13· How are the companies held to account for the

14· considerable morbidity assumption errors they made?

15· · · · · · How are the companies held to account for

16· the true but misleading statements made in consumer

17· brochures they provided that induced the Maryland

18· consumer to purchase their long-term care insurance

19· policies?

20· · · · · · Let me give you a little bit of history.

21· I started selling long-term care insurance in 1991.

22· Another thing that occurred in 1991 was the

·1· publishing in the New England Journal of Medicine, a

·2· Kemper-Murtaugh study.· And I'm sure all of the

·3· actuaries in the room are familiar with that.

·4· · · · · · And this is where we derived the data

·5· that two out of five people would likely need

·6· long-term care.· That half of the people would

·7· require care for 90 days or less, and that of the

·8· other half, one out of f ive would require care for

·9· five years or longer.

10· · · · · · This is the most extensive study that's

11· been conducted in long-term care at the time.· 1991

12· this information was known.· By 1996 the companies

13· realized that their underwriting requirements were

14· wide of the mark, and some of the companies started

15· to make changes in their underwriting standards.

16· · · · · · If a person had had a stroke, they no

17· longer could get a policy with some of the carriers

18· as an example.· By the end -- by 1998 the companies

19· knew that their persistency numbers were wrong.· Way

20· wide of the mark.

21· · · · · · So, let's fast forward to 19 -- to 2001.

22· Kemper-Murtaugh study 10 years ago.· Okay?· 1996

·1· they knew the underwriting was wrong.· 1998 they

·2· knew the persistency numbers were wrong.· And

·3· companies had already started to make the changes.

·4· · · · · · So, it's 2001, and let's put on your

·5· consumer hat.· Each of us in this room is a

·6· consumer.· What if you were purchasing a long-term

·7· care policy and the inside cover of the Genworth

·8· policy brochure, one of the three companies that

·9· you're considering states, while GE's long-term care

10· division reserves the right to raise future premiums

11· for all policyholders by State, it has never had to

12· do so since it pioneered long-term care insurance

13· more than 25 years ago.· And your premiums will

14· never increase due to changes in your health status

15· or age.

16· · · · · · Or if you look at the second carrier, the

17· first statement in the brochure was John Hancock, a

18· name you can trust.· Rely on us, your partner in

19· care.· Turn to a leader in long-term care insurance.

20· When it comes to long-term care insurance, you want

21· to be sure that the company behind your policy is in

22· it for the long term.· Established 140 years ago,

·1· John Hancock is a pioneer in the long-term care

·2· field, issuing our first policy in 1997.· And today

·3· we serve more than 300,000 long-term care insurance

·4· policyholders.

·5· · · · · · Or do you look at MassMutual?· Who touts

·6· its financial strength and states it has paid

·7· dividends to participating policyholders every year

·8· since 1869.· Yet is requesting a rate increase

·9· today.

10· · · · · · What are you, the Maryland consumer, to

11· infer from these representations?· Wouldn't you

12· reasonably assume that these companies with so much

13· financial strength and experience knew what they

14· were doing and had priced their policy based on

15· knowledge and experience.

16· · · · · · I have an 86 year old, an 80-year old

17· couple who have seen their premiums almost double as

18· a result of the five rate increases that have been

19· granted by MIA since 2008.· They made carefully

20· considered planning decisions based on the

21· reasonable expectation that the insurance company

22· knew what it was doing.· After all in the policy

·1· brochure it said that the company had never had a

·2· rate increase.

·3· · · · · · They have paid $98,000 in premiums

·4· to-date.· They will continue to pay premium

·5· increases because they feel they have no other

·6· viable option.· They don't want to reduce their

·7· coverage because they see friends and family,

·8· contemporaries needing care as they age.· However,

·9· as these increases have continued, I see more and

10· more of my clients compromise their original intent

11· when they purchased this important coverage by

12· reducing their benefits or in some cases lapsing

13· their policies because the premiums have become too

14· high.

15· · · · · · Nonforfeiture benefits provide at best a

16· very few months of coverage.· The decisions they

17· have been forced to make because of their financial

18· circumstance will leave them with greatly reduced

19· benefits at the time they need care.

20· · · · · · When they asked me, Ed, when can I expect

21· these rate increases to stop?· All I can tell them

22· is I don't know.· And the MIA is limited in what it

·1· can do when an insurance carrier requests a rate

·2· increase, and that they should expect the rate

·3· increases to continue.

·4· · · · · · We all look to the MIA not only to review

·5· carefully all rate increase requests but to protect

·6· the consumer by giving the appropriate pushback to

·7· these requests.· It's up to the MIA to help build on

·8· the transparency steps that have already been made

·9· by taking the additional steps necessary to create

10· the stable environment necessary to rebuild consumer

11· confidence in this important coverage.

12· · · · · · It's time to put an end to the seemingly

13· endless rate increases which not only hurt the

14· consumer but the State of Maryland as well because

15· of the additional burden that will be placed on

16· Medicaid.

17· · · · · · It's time for the companies to accept

18· responsibility for their significant mistakes and

19· stop knocking on MIA's door asking for relief from a

20· situation that they created.

21· · · · · · From the MIA website, the Agency's goal

22· is to provide efficient, effective service to both

·1· the consumers of insurance products and the

·2· insurance industry.· The Maryland Insurance

·3· Administration best serves its core constituent by

·4· assuring fair treatment of consumers.

·5· · · · · · By what measure can these constant

·6· increases be considered fair?· If the problem is

·7· that the MIA believes the law limits its efforts on

·8· behalf of the Maryland consumer, then let us know

·9· what legislation needs to be enacted to untie your

10· hands.

11· · · · · · If the MIA believes that based on current

12· law that it must continue to permit these rate

13· increases, I echo my colleague Karen Kerland's

14· written testimony in suggesting that the following

15· steps at a minimum be taken that -- be taken to

16· create a fair environment.

17· · · · · · No. 1, exclude policyholders age 75 and

18· older from these increases.· This has already been

19· mentioned.· And the term that was used that really

20· bothered me was the term discriminatory.· They can't

21· make the changes because you -- they could not limit

22· at age 75 because it would be discriminatory.

·1· · · · · · Let me tell you what the word

·2· discriminatory means as far as my clients.· I have

·3· clients in their 80s, and they are presented with a

·4· fact that their premiums are going to dramatically

·5· increase with John Hancock 32 percent, or they are

·6· given an option, they can have a landing spot of 4.3

·7· percent.· Okay.

·8· · · · · · But if they require care in ten years and

·9· they take the 4.3 percent option, they have saved a

10· couple thousand dollars -- several thousand dollars

11· in premium in the short run.· And in the long run it

12· will cost them tens of thousands of dollars at the

13· time they need care.

14· · · · · · And this story can be told again and

15· again and again.· I see it all the time.· I live it

16· every day.· And there is leveraging too because when

17· you have a level -- it's only a 15 percent increase.

18· But a 15 percent increase to a 55 year old versus a

19· 15 percent increase to an 80 or 85 year old, a big

20· difference in terms of absolute dollars.

21· · · · · · And the actuaries in the room know that

22· I'm absolutely right in that statement.· That's

·1· where the discrimination takes place.

·2· · · · · · The increases are much, much larger at

·3· older ages.· It has a much greater impact on people

·4· who are older.· And, so, what we are doing is we are

·5· at the expense of these older policyholders, the MIA

·6· is guaranteeing the bottom line of insurance

·7· companies.

·8· · · · · · What the actuaries mentioned was all we

·9· want to do is to get back at break-even.· And what I

10· am saying is, you made mistakes, absorb the losses.

11· It is a -- it is a shareholder problem not a

12· policyholder problem.· And you just have to accept

13· the losses.· Because what is happening is incredibly

14· discriminatory.

15· · · · · · Continue the 15 percent limit in

16· Maryland.· Once a rate increase has been granted, no

17· additional rate increases shall be implemented for a

18· period of time of five years.· Going forward once a

19· policyholder has held a policy for ten years or more

20· and has reached age 75, there should be no rate

21· increases.

22· · · · · · I ask the companies to work with the MIA

·1· to find an answer.· I understand the company's

·2· problem.· If the company were here in the State able

·3· to -- providing policies and if they weren't able to

·4· pay claims, that would be a problem.

·5· · · · · · But MassMutual, is that really a problem?

·6· John Hancock, is that really a problem for you?· Are

·7· you financially going to go under because of this?

·8· You made mistakes.· Absorb the losses.· Stop

·9· foisting this on the consumer.

10· · · · · · I know we all want to provide the

11· consumers with a fair insurance environment so the

12· important financial decisions that are made are

13· based on reasonable expectations of premium costs as

14· well as policy performance.· Transparency is a good

15· first step.· Fair accountability should be the

16· second.· Thank you.

17· · · · · · COMMISSIONER GRODIN:· Thank you,

18· Mr. Hutman.

19· · · · · · MR. SWITZER:· Thank you very much. I

20· regret if this is redundant, but I just wanted to

21· see if it elicited some more thoughts from you

22· because I am interested, to state the obvious.

·1· · · · · · So, as far as who bears the brunt of the

·2· consequences of what's happened, one more time on

·3· what's being done so far, the 15 percent cap.· We

·4· covered that.· The other that the companies when

·5· they originally priced these policies generally

·6· speaking, every assumption was exactly right,

·7· expected over the life of the 20, 30 years of the

·8· policy to pay out 60 percent of premium in claims.

·9· So, the rest are brokers, administrative costs,

10· everything else.

11· · · · · · So, another way that consequences are

12· being felt is that again some companies are pricing

13· for the break even.· I know you spoke to that.

14· We've also -- there has been laws that for all the

15· business here forward it has to be 85 percent, not

16· 50 or 60.· There has to be some consequence there.

17· · · · · · If the company hasn't asked for 80, the

18· MIA has looked at lifetime loss ratios up to 80 or

19· so for the reasons that you have laid out.

20· · · · · · I appreciate what you passed on in the

21· brochures, and I thought it was interesting that

22· Company A said it at the time, while the company

·1· reserves the right to raise future premiums for all

·2· policyholders by State and class, it has never had

·3· to do so since it pioneered long-term care.· And

·4· your premiums will never increase due to a changes

·5· in your health status or age.· I understand from the

·6· consumer, that's perceived a certain way.

·7· · · · · · For nonforfeiture, we have tried to

·8· advocate for -- obviously if I were -- had long-term

·9· care and had invested so many years of premium in, I

10· would be very reluctant to just lapse.· I have got a

11· lot of skin in so far.

12· · · · · · So, trying to at least make -- for those

13· who have to lapse, it more advantageous for them to

14· lapse.· They will be left with some money to pay

15· claims.

16· · · · · · We have reduced even the 15 percent

17· increases here at the MIA when it's warranted by the

18· actuarial facts as we see them.· We have brought up

19· ideas such as if you have new policies, to have a

20· little mercy for people over age 75.· As you have

21· alluded, that's another way.

22· · · · · · We have always looked at, is this the

·1· first increase in quite a long time?· Maybe -- and

·2· it's been brought up that waiting has a lot of

·3· premium increase implications if you haven't acted

·4· earlier.· Grading increases.· We've also tried to

·5· employ rigor, that you are projecting things that

·6· will get very bad in the future, that demonstration

·7· needs to be airtight.

·8· · · · · · So, these are some of the things that we

·9· looked at.· And I understand where you're coming

10· from.· But I think in summary my question for you

11· is -- I know I have stated again what the charges of

12· the actuaries, not inadequate, not excessive, not

13· discriminatory.

14· · · · · · But from what's being done so far, the

15· question is is it enough.· And we're still asking

16· ourself that question constantly.· But is only a

17· denial what you feel is the right course?· I don't

18· know if that's the right way to ask the question,

19· but I hope you know where I'm coming from.

20· · · · · · MR. HUTMAN:· I don't think denying the

21· rate increases is necessarily the answer.

22· · · · · · MR. SWITZER:· Okay.

·1· · · · · · MR. HUTMAN:· My concern is the extent and

·2· the continuity in the rate increases.

·3· · · · · · MR. SWITZER:· Okay.

·4· · · · · · MR. HUTMAN:· They never seem to end.

·5· Okay?· My policy, I have had five increases from

·6· Genworth.· I have had six increases from CNA.· I'm

·7· not dropping my policies.· I'm going to continue to

·8· pay the premiums, because I know what the facts are.

·9· I know what the probabilities of my requiring care.

10· Okay?

11· · · · · · But in terms of finding -- finding that

12· fair balance, that middle ground, what I'm trying to

13· convey is that enough weight has not been given to

14· the fact that the reason that we have the problem

15· today is because companies were overly aggressive in

16· their pricing, in their underwriting 15, 20 years

17· ago.· Okay?

18· · · · · · They created this problem.· Had their

19· pricing been correct, had their underwriting been

20· correct, the extent of today's problem would be

21· dramatically less.· Okay?

22· · · · · · Look, none of the companies, the

·1· companies invest their reserves, none of the

·2· companies could have possibly foreseen what occurred

·3· with interest rates in 2008 and 2009.· The cycle

·4· stopped.· And some adjustment should be made for

·5· that, and increases should be allowed for that.

·6· · · · · · But morbidity assumptions, that is an

·7· insurance company problem.· They knew the extent of

·8· the problem or that there was a significant problem

·9· in 1991.· Okay?· They knew there were underwriting

10· issues by the middle of the 1990s.· They knew

11· persistency was now a problem by the end of the

12· decade.· Okay?

13· · · · · · And we're talking -- what I mention is a

14· policy that's taking place in 2001, and that's

15· MassMutual started issuing their policies in 2000.

16· They knew or should have known.· Okay?

17· · · · · · And, so, what I'm asking the MIA to do is

18· to temper the extent of the increases and look at

19· the numbers within this broader context.· Numbers

20· don't always mean what we think they mean.

21· · · · · · MR. SWITZER:· Agreed.· Thank you.· That's

22· helpful.· And I just wanted to relay that one of the

·1· first things that Commissioner Redmer asks for when

·2· we put these in front of him and what we look at is

·3· the lifetime increases.· What's different from the

·4· first increase versus these members have already had

·5· a hundred percent of rate increases.

·6· · · · · · And also in reviewing the assumptions,

·7· the assumptions can change from the past.· They can

·8· change again in the future.· And that's part of our

·9· attempted rigor.· Thanks again very much.

10· · · · · · COMMISSIONER GRODIN:· Thank you.· Next on

11· our list of individuals who had asked to speak is

12· Ms. Spector.· Is Ms. Spector here or on the phone?

13· Okay.· Okay.· And I think that does it.· Yeah.· Oh,

14· I'm sorry, Ms. Rams.

15· · · · · · MS. RAMS:· ·Thank you.· I'm here --

16· · · · · · THE REPORTER:· You have to hold it up to

17· your mouth.

18· · · · · · MS. RAMS:· Sorry.· I'm here on behalf of

19· people my age who are in their 80s who cannot afford

20· the 75 or 50 percent increases.· I pay out of my

21· check, my Social Security every month just for

22· coverage $893 in medical coverage.· That is

·1· disgusting.· And you're telling me you would like to

·2· raise it on me.

·3· · · · · · I think you have to put a limit on no

·4· more than if you got to raise it, 15 percent.· We

·5· can't afford it.· It cost me $510,000 to take care

·6· of parents who didn't have long-term care.· I can't

·7· afford that any more.

·8· · · · · · If you raise it the amount you want, I

·9· can't afford to live nor can a lot of people my age.

10· I haven't slept at night since I heard about this

11· increase.· That's a bad feeling.

12· · · · · · You're young now.· You don't understand

13· what we go through.· It is tough knowing that you

14· may be thrown out or not being able to get medical

15· coverage because you cannot afford it.

16· · · · · · There has got to be some way that you can

17· control how much you raise it.· I don't care if you

18· do it by age.

19· · · · · · Let me explain to you something.· The

20· first long-term care company I was with for 12 years

21· went bankrupt.· And nothing happened.· I wasted all

22· that money.· By the time I could get in again I was

·1· in my late fifties; so, my premiums are higher.

·2· · · · · · If you raise this, there are so many

·3· seniors that won't be able to sleep at night or will

·4· give up food and where they live to be able to pay

·5· for this coverage.· There has got to be some way you

·6· can control this.· That's all I have to say.

·7· · · · · · COMMISSIONER GRODIN:· Thank you,

·8· Ms. Rams.· Is there anybody else here who would like

·9· to speak in the room?

10· · · · · · Is there anybody else on the phone?

11· · · · · · Oh, yes, please.

12· · · · · · MS. LEIMBACH:· My name is Sally Leimbach.

13· And I've been an insurance broker specializing only

14· in long-term care insurance since 1992.· I just

15· wanted to add to the comments that were said today

16· that when the MIA is reviewing the options that are

17· going to be provided to the insureds who are facing

18· rate increases, that they -- they look to be sure

19· they are as creative as possible and as fair as

20· possible.

21· · · · · · I'm aware for instance with the

22· partnership programs in Maryland for long-term care

·1· insurance, if you are 75 or younger, you're required

·2· to have some kind of compound inflation included on

·3· your policy.

·4· · · · · · So, if an insured decided, okay, I will

·5· eliminate my inflation protection and will reduce my

·6· premium, they may be giving up their ability to have

·7· a partnership benefit if they so qualified at claim

·8· time.

·9· · · · · · I am aware that MIA was active about

10· this, and it's my understanding that in Maryland

11· 1 percent compound is now allowed.· So, the problem

12· with that is will the insurance companies that did

13· not file with a 1 percent compound be able to -- are

14· they able to offer that as a way to mitigate costs,

15· reducing from the 5 percent or the 4 percent or

16· whatever they have had to a 1 percent compound.

17· · · · · · I am unsure whether that takes

18· legislation or not to make it easier for companies

19· so that they don't have to do come with a costly

20· refiling for existing policies that did not offer

21· that at the time they were regularly filed.

22· · · · · · Maybe there can be some kind of a

·1· grandfathering done by the State of Maryland that

·2· would allow all companies to be able to offer a

·3· 1 percent.· I am not sure about all the legalities

·4· and regulation.· But I do know that that would be

·5· very helpful as an option for people not to lose

·6· what they really did want to have, a partnership

·7· qualified long-term care insurance policy, by

·8· following directions from -- or options they are

·9· given reduce their premium and perhaps not even

10· realizing if they do away with their inflation, they

11· are going to lose their partnership policy ability.

12· · · · · · Thank you.

13· · · · · · MR. HUTMAN:· May I ask one quick

14· question?

15· · · · · · COMMISSIONER GRODIN:· Yes.

16· · · · · · MR. HUTMAN:· Let's assume in a perfect

17· world, we are looking to the future, and they have

18· come up with a means of -- and Alzheimer's becomes a

19· controlled chronic condition, no longer leads to

20· long-term care needs, and interest rates have gone

21· to 10 percent, rates of return on invested reserves

22· have gone to 10 percent, what is the process or the

·1· mechanism for existing policyholders to have a

·2· reduction in their premium?· What steps would the

·3· companies take to see that that happens?

·4· · · · · · MR. SWITZER:· To restate the question,

·5· what if assumptions do change down the road,

·6· Alzheimer's for example becomes controlled, interest

·7· rates rise to 10 percent, what mechanism is in place

·8· to reflect those changes, material changes in LTC

·9· premiums?· Would those assumptions alone lead to a

10· rate reduction?

11· · · · · · Well, first, as you know -- to answer

12· your question, the MIA monitors financial results

13· every year for financial statements.· I would be

14· inclined, my team and I, to engage the company about

15· just like recently in December the tax cuts and jobs

16· act for the affordable care market generated a fair

17· amount of dollars for insurance companies, improved

18· their tax bracket.· We asked them how is this

19· reflected in your filing.

20· · · · · · We would intend to do the same thing.

21· The nuance to that is that typically obviously

22· insurers file at their own volition, and we wait for

·1· them to submit a filing.· We wouldn't wait.

·2· · · · · · MR. HUTMAN:· But I'm a policyholder that

·3· purchased a policy in 2005, the same answer would

·4· apply?

·5· · · · · · MR. SWITZER:· As soon as we saw these

·6· kind of dynamics emerging, to ask the carriers what

·7· are you doing about it?· And I know there would be a

·8· time lapse to when we get from that conversation to

·9· a rate filing to an approved rate filing, but we

10· would be sensitive to the timing and the magnitude

11· and what it would mean to a consumer to try to push

12· it.

13· · · · · · MR. HUTMAN:· Thank you.

14· · · · · · MR. PLUMB:· Can I add something to that?

15· · · · · · MR. SWITZER:· Sure.

16· · · · · · MR. PLUMB:· The model regulation that's

17· in effect now requires once a company files for a

18· rate increase, you have to submit annual followups

19· for three years to the insurance division.· And that

20· three years can be extended for basically whatever

21· reason the Commissioner decides.

22· · · · · · And if it ever looks like you're not

·1· going to meet the minimum loss ratio, which is 85

·2· percent on the increase, then the Commissioner can

·3· require the company to either increase benefits or

·4· reduce premiums so they would meet the minimum loss

·5· ratio.

·6· · · · · · That only applies to policies that were

·7· issued on average around 2002 and later.· But we

·8· have -- we have supported doing that for all

·9· policies in certain States that are concerned about

10· the older policies.

11· · · · · · And if the minimum loss ratio isn't being

12· met after a rate increase, you have to adjust

13· downward premiums.

14· · · · · · MR. HUTMAN:· That you for the

15· explanation.· That's helpful.

16· · · · · · MR. ZIMMERMAN:· I think you stated a set

17· of conditions that are -- what I will call unlikely

18· but I have learned in the last couple of years what

19· I think likely could happen.

20· · · · · · But to everybody's point, I think Todd

21· made the point earlier, we have an obligation to

22· make sure rates aren't excessive.· That's really the

·1· answer to your question.

·2· · · · · · MR. HUTMAN:· Okay.

·3· · · · · · COMMISSIONER GRODIN:· All right.· We will

·4· go back to the phone.· Is there anyone on the phone

·5· that would like to speak?

·6· · · · · · All right.· Then this will conclude our

·7· rate hearing today.· I want to thank everybody for

·8· coming and everyone for dialing in.

·9· · · (Whereupon at 10:33 a.m. the hearing concluded.)

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·1· STATE OF MARYLAND

·2· COUNTY OF HOWARD SS:

·3· · · · · · I, Susan Farrell Smith, Notary Public of

·4· the State of Maryland, do hereby certify that

·5· above-captioned matter came on before me at the time

·6· and place herein set out.

·7· · · · · · I further certify that the proceeding was

·8· recorded stenographically by me and that this

·9· transcript is a true record of the proceedings.

10· · · · · · I further certify that I am not of

11· counsel to any of the parties, nor an employee of

12· counsel, nor related to any of the parties, nor in

13· any way interested in the outcome of this action.

14· · · · · · As witness my hand and notarial seal this

15· 3rd day of September, 2018.

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17· · · · · · · · · · · · · ·_____________________

18· · · · · · · · · · · · · · ·Susan Farrell Smith

19· · · · · · · · · · · · · Notary Public

20· (My Commission expires February 8, 2020)

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·1· · · · · ·MARYLAND INSURANCE ADMINISTRATION

·2· · · · · · 200 ST. PAUL PLACE, 24th Floor

·3· · · · · · · ·BALTIMORE, MARYLAND 21202

·4

·5

·6· · · · · · ·LONG-TERM CARE PUBLIC HEARING

·7

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·9· · · · · · _____________________/

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11· · · · · · · · ·TRANSCRIPT OF HEARING

12· · · · Before Deputy Commissioner NANCY GRODIN

13· · · · · · · · · Baltimore, Maryland

14· · · · · · · · Monday, August 20, 2018

15· · · · · · · · · · · ·9:00 a.m.

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18· Job No.:· WDC-180365

19· Pages:· 1 - 46

20· Reported by:· Susan Farrell Smith

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Page 2·1· · · · · ·Hearing held at the offices of:

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·4· · · · · · ·Maryland Insurance Administration

·5· · · · · · ·200 St. Paul Place, Suite 2400

·6· · · · · · · Baltimore, Maryland 21202

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13· · · · · · Pursuant to Public Notice, before Susan

14· Farrell Smith, Notary Public for the State of

15· Maryland.

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Page 3·1· APPEARANCES:

·2· · · · · · Nancy Grodin, Deputy Commissioner

·3· · · · · · Todd Switzer, Chief Actuary

·4· · · · · · Robert Morrow, Associate Commissioner

·5· · · · · · Adam Zimmerman, Actuary

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Page 4·1· OPENING STATEMENTS:

·2· · · · · · By Deputy Commissioner Grodin· · · ·5

·3· · · · · · By Mr. Switzer· · · · · · · · · · ·10

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·5· TESTIMONY OF CARRIERS:

·6· · · · · · By Mr. Plumb· · · · · · · · · · · ·18

·7· · · · · · By Mr. Fawthrop· · · · · · · · · · 27

·8· · · · · · By Mr. Kinney· · · · · · · · · · · 39

·9· · · · · · By Mr. Anderson· · · · · · · · · · 46

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11· PUBLIC COMMENT:

12· · · · · · By Mr. Burgan· · · · · · · · · · · 53

13· · · · · · By Mr. Hutman· · · · · · · · · · · 57

14· · · · · · By Ms. Rams· · · · · · · · · · · · 75

15· · · · · · By Ms. Leimbach· · · · · · · · · · 77

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·1· · · · · · · · P R O C E E D I N G S·2· · · · · · COMMISSIONER GRODIN:· All right.·3· Welcome, everyone.· And thank you for coming today.·4· I am Nancy Grodin, Deputy Commissioner of the·5· Maryland Insurance Administration.·6· · · · · · And this is our third public hearing on·7· specific carrier rate increases for long-term care·8· insurance in 2018.·9· · · · · · Today's hearing will focus on several10· rate increase requests now before the MIA in the11· individual long-term care market.· These include12· requests from Senior Health Insurance Company of13· Pennsylvania proposing increases of 15 percent; John14· Hancock Life Insurance Company proposing increases15· of 15 percent; MedAmerica Insurance Company16· proposing increases of 4.2 percent; and17· Massachusetts Mutual Life Insurance Company18· proposing increases of 15 percent.19· · · · · · These requests affect about 6,21420· Maryland policyholders.· The goal of today's hearing21· is for the insurance company representatives to22· explain their reasons for rate increases.

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·1· · · · · · We will also listen to comments from

·2· consumers and other interested parties.· We are here

·3· to listen and ask questions of the carriers and

·4· consumers regarding the specific rate increase

·5· requests.

·6· · · · · · I would like to take a moment to have

·7· each of the people here at the front table introduce

·8· themselves, and then we will go into the audience

·9· and have the other MIA staff members introduce

10· themselves.· Starting to my right.

11· · · · · · MR. ZIMMERMAN:· I'm Adam Zimmerman.· I'm

12· an actuary at the Maryland Insurance Administration.

13· · · · · · MR. MORROW:· Bob Morrow, I'm the

14· Assistant Commissioner for Life and Health.

15· · · · · · MR. SWITZER:· Todd Switzer, Chief

16· Actuary.

17· · · · · · COMMISSIONER GRODIN:· Thank you.· And

18· let's go around room now starting with Nancy.

19· · · · · · MS. MUHLBERGER:· Nancy Muehlberger,

20· Actuary.

21· · · · · · MR. PATTI:· Michael Patti, Government

22· Relations Associate at MIA.

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·1· · · · · · MS. KWEI:· May Kwei, Chief of Life and·2· Health Complaints.·3· · · · · · COMMISSIONER GRODIN:· And at the table.·4· · · · · · MS. IMM:· Tracy Imm, I'm the Director of·5· Public Affairs.·6· · · · · · MR. SVIATKO:· Joe Sviatko, Public Affairs·7· Office.·8· · · · · · MR. BURGAN:· My name is Barry Burgan.·9· I'm a policyholder.10· · · · · · COMMISSIONER GRODIN:· Thank you, sir.11· All right.· I'm going to go over a few procedures12· that we would like to follow today.· First of all,13· there is a handout that has all of our contact14· information on it.15· · · · · · THE REPORTER:· Put the microphone up.16· · · · · · COMMISSIONER GRODIN:· It was at the front17· table, and please make sure to pick one up.· If you18· would like to speak today, you will need to sign up19· on the sheet.· And we do have a number of people who20· have signed up to speak, and include your name and21· contact information.22· · · · · · We will only be calling the names of

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·1· those folks listed on the sign-up sheet and those·2· who RSVP'ed in advance to speak.·3· · · · · · Second with the exception of MIA staff,·4· this hearing is not a question/answer forum.·5· Comments from interested parties were received and·6· reviewed in advance of this meeting.· And please·7· continue to submit your comments until Monday,·8· August 27th.· And, again, the MIA will continue to·9· keep the record open until Monday, August 27th.10· · · · · · The transcript of today's meeting as well11· as all written testimony that's been submitted will12· be posted on the MIA's website on the long-term care13· page as well as the quasi-legislative hearings page.14· · · · · · The long-term care page can be found at15· the MIA website by clicking on the long-term care16· tab located under the quick link section which is on17· the left-hand side of our page.18· · · · · · As a remainder, we do have a Court19· Reporter here today to document the hearing.· When20· you are called up to speak, please state your name21· and affiliation clearly for the record.· And I'm22· assuming that we will pass this microphone over to

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·1· anybody -- oh, there is microphone over there.· So·2· hold it close.·3· · · · · · All right.· If you are dialing into the·4· hearing through our conference call line, we ask·5· that you please mute your phones.· Please, please·6· don't put us on hold.· What this does is it·7· broadcasts your music.· It happened in our last·8· hearing.· It was very disruptive.·9· · · · · · So, I'm going to ask again, please do not10· put us on hold.· It will broadcast your hold music.11· Even if you don't think you have hold music, you do.12· So, please put us on mute.13· · · · · · Also any time before speaking if you14· could please restate your name and your15· organization, that would be a great help.· And thank16· you.17· · · · · · We're going to be asking carriers to come18· up individually to speak regarding their rate19· requests A to Z.· Afterwards, interested20· stakeholders and those dialing in via conference21· call line will be invited to speak.22· · · · · · All right.· So, does anybody at the front

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·1· table have anything they would like to say?·2· · · · · · MR. SWITZER:· Yes.·3· · · · · · COMMISSIONER GRODIN:· Okay.·4· · · · · · MR. SWITZER:· Good morning.· I would like·5· to thank everyone who is here.· It seems like the·6· Affordable Care Act gets most of the attention, but·7· long-term care is every much as much in a situation·8· that needs a lot of input and a lot of attention to·9· address some of the concerns that are dire.10· · · · · · We currently have -- there is 10 of us in11· the actuaries team.· We have 35 long-term care rate12· filings in-house.· I think by the end of this13· meeting, we will have five more.· They just keep14· coming.15· · · · · · The increases range from 30 -- the16· average is a 36 percent increase, despite the 1517· percent cap, and lot of companies file nationwide.18· The range is from 4 percent to 112 percent.19· · · · · · Just trying to put some numbers to a lot20· of the points that you've made and others have made21· through public comments, that the increases are22· large.· And we will get to the insurer side as well.

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·1· · · · · · The NAIC is -- is very active in looking·2· at this.· Price Waterhouse Coopers fairly recently·3· put out an article about long-term care, entitled·4· Crisis of Confidence: A Call to Action.· There are a·5· lot of eyes on this, and we're trying to increase·6· the number of eyes on this.·7· · · · · · I would also like to thank the people who·8· submitted public comments.· We had five.· And for·9· example, Charles bought the policy 17 years ago from10· one of the carriers here today.· It cost 2,500 at11· the time; it costs 5,000 today.· They can't keep up.12· · · · · · Tim and Bonny also have a -- coverage13· with a carrier here today.· Some of their comments I14· pulled out.· They said they worked hard to plan15· their retirement.· They don't want to shift costs to16· their children or the government.· Please give us17· more information, provide us some assistance.18· · · · · · Jeff on the Eastern Shote talked to us19· about the longevity of long-term care.· He said in20· plain language, a lot of people are just trying to21· have some security, some dignity in these years.22· Give us some liberal alternatives.

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·1· · · · · · I'm going to try to briefly respond to·2· some of these.· Ed, who I hope is here today, who·3· asked, well, how much latitude does the MIA really·4· have?· Are your hands tied or what?· And how are·5· carriers being held to account?· Questions like·6· that.·7· · · · · · And lastly, Karen pointed out that one of·8· the carriers here is very financially strong.· Some·9· of her clients are just at this point in time10· reaching their 70s and 80s, and it's not the time to11· scale back benefits in order to offset premiums.12· · · · · · First to the question of the MIA's13· latitude.· Maryland code says the rates must be14· reasonable in relation to benefits.· It says other15· things, but the key ones, not inadequate or16· excessive or unfairly discriminatory.17· · · · · · So, as you know, there is balance there.18· They can't be inadequate.· They are businesses.19· They were projecting costs 20, 25, 50 years out.· We20· recognize that.21· · · · · · They also need to be reasonable.· They22· need to be -- they can't be discriminatory, can't be

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·1· excessive.· I think we need to consider all the·2· facts of if an increase is needed, should it be·3· gradual.· The assumptions, the range of people touch·4· on, is the company currently in a bad situation or·5· will they be in a bad situation in 10 or 20 years?·6· They both are actuarial matters that need to be·7· squarely addressed, but ones that come to mind.·8· · · · · · So, as far as plain language, why are·9· increases coming in so frequently and at the10· magnitude they are coming in?· A lot of this you11· know, but just to put some numbers to it, the12· percentage of Americans over age 80 in 2015 was 2.913· percent.· In 2050, it's a ways out, but that's14· projected to be 7.3 percent.· It's nearly triple.15· That's significant.16· · · · · · The number of Americans over age 65 in17· 1970 was 8 percent; in 2050 it will 20 percent.· And18· of those 20 percent, another 20 percent of them will19· need care for five years.· That effects costs; it's20· a reality.21· · · · · · It is true that statistics I heard in the22· '60, the average family was having 2.2 children to

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·1· care for their parents when they were older.· The·2· number is down to 1.4.· That's not as available to·3· seniors.·4· · · · · · And lastly, people aren't saving as much·5· money that -- in 1980 according to the World Bank·6· 21 percent of the GDP was savings.· Today in 2010,·7· it keeps coming down, it's 15 percent.· So, just a·8· few numbers to why we are where we are.·9· · · · · · Some of the consequences, in Maryland we10· have 129,000 seniors with long-term care coverage.11· It provides a valuable benefit.· Long-term care12· started in the '70s, the late '70s as you know.13· Maryland had 38 carriers.· I'm excluding the ones14· that sold it with life insurance.· 25 have left.· We15· are down to 13.16· · · · · · Most recently in March, State Farm was17· the 25th to leave.· So, we keep that in mind as18· well.19· · · · · · So, what has been done?· What is the MIA20· doing?· What will we do?· What's been done, one, we21· are the only State that has a 15 percent cap. I22· know that's not a panacea.· I know Illinois looked

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·1· at it and didn't do it.· But it's a cap that works·2· both ways.·3· · · · · · I think it grades an increase for the·4· companies that are really in a bad position or·5· really slows down how much they can correct.· But·6· it's significant, and it comes up quite often.·7· · · · · · Our largest long-term care insurer,·8· Genworth, they are, as you may know, contemplating a·9· merger with China Oceanwide.· And our Commissioner10· has been very active in looking at the SEC filings11· and looking at some of the parameters around that12· deal.· And the increases that have been pursued by13· Genworth have been on hold until there is more14· information, there is more questions answered about15· that, that deal.· That's another example.16· · · · · · In the past six months in the actuary's17· office we are scrutinizing filings.· We are trying18· to build our own models, improve our own models.19· · · · · · We've had, for example, nine insurers20· submit an average increase of 36 percent.· That's21· not just in one year.· It's not just a cap.· And the22· average approved has been 11.5.

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·1· · · · · · It's more than in the past, and we are·2· trying to work more with carriers to make sure that·3· balance is there.· But it's not that the filings are·4· being taken in, we ask a few questions and we just·5· approve it.· It's just not the facts.·6· · · · · · A lot of times the insurers of their own·7· volition have -- again how are they held to account,·8· have priced to a lifetime loss ratio of 100 percent.·9· Meaning if they take in a dollar of premium, they10· have agreed to pay a dollar of claims.· No profit.11· Some have done that on their own.· Not all.· And12· that's another aspect of what's been done.13· · · · · · In Annapolis, there are always many bills14· about long-term care.· One that came up this last15· session was to if you have a contingent benefit upon16· lapse, explore crediting interest on the premiums17· earned.· That was agreed to be examined further.18· But it's just an example of those bills put forward19· to get attention in Annapolis to what can be done.20· · · · · · So, lastly what -- what will we do.· Some21· of the ideas that were put forward by some of the22· public comments and ones that have come up in

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·1· Annapolis before, are what if you exclude increases·2· for people over 75.· Again just an idea.· It needs a·3· lot of vetting, but we will explore every idea.·4· · · · · · What about if you get an increase, you·5· don't get another increase for five years.· Ideas.·6· But if you're age 75 and you've had the policy for·7· 10 years, how about no more rate increases.·8· · · · · · Not all of these work.· And it's·9· difficult for a business that entered a market to10· change the rules after the fact.· But for new11· business trying to at least put ideas out there to12· conjure other thoughts.13· · · · · · And lastly when we scrutinize the14· filings, there is in some ways two camps, in some15· cases again the company is already in a bad16· situation.· They are in duration 15 for example, and17· they expected to be paying 50 cents on the dollar of18· premium, and they are paying 110.· That's one19· situation where it's clear, and we try to work with20· them to gradually get on a path to find balance.21· · · · · · There is other situations where it's very22· assumption driven and -- as the nature of long-term

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·1· care is, and the financial losses won't come for ten

·2· years, five years.· And those we look a little

·3· closer and we try to understand the seriatim models

·4· that the carriers have.

·5· · · · · · So, I appreciate again comments.· They

·6· are helpful to us to get another vantage point. I

·7· hope we have spoken to them a bit.· And I will turn

·8· back to Nancy to moderate and try to answer any

·9· other questions later.

10· · · · · · COMMISSIONER GRODIN:· Thanks, Todd.

11· Anyone else?· Okay.· All right.· Then we can start

12· with the John Hancock Life Insurance Company,

13· Mr. Plumb.

14· · · · · · MR. PLUMB:· Good morning, everybody.

15· Thank you, Deputy Commissioner Grodin and your staff

16· for providing us the opportunity to participate in

17· this important hearing today.

18· · · · · · My name is David Plumb, and I'm vice

19· president of actuary at John Hancock, responsible

20· for the in force pricing of our long-term care.

21· · · · · · John Hancock first issued long-term care

22· insurance in 1987.· Long-term care services can cost

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·1· hundreds of thousands of dollars, and this can·2· easily deplete someone's saving and then some.·3· · · · · · Pooling an individual's risk with others·4· through insurance is much more affordable than·5· trying to earmark savings to cover the potential·6· costs.·7· · · · · · We have an outstanding filing with the·8· MIA for a policy form that was sold in Maryland from·9· 2007 through 2011 where we requested a premium10· increase of 15 percent.· This will impact about 120011· Maryland insureds, and this plan has not had any12· prior rate increase.13· · · · · · Our original requested increase on this14· plan was about 27 percent, but we reduced to15· 15 percent to satisfy the annual limit in Maryland.16· We expect to file for the remaining amount next year17· with the total of the increase being a little bit18· more than the 27 percent due to the timing of the19· implementation.20· · · · · · We are not trying to recover any past21· losses in our filings.· The increases are needed to22· cover projected future losses.· So, I want to

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·1· explain why we need these premium adjustments.· So,·2· long-term care insurance is a very long duration·3· product where people buy in their 50s and most claim·4· in their 80s.· And long-term care uses and expenses·5· are difficult to predict for many decades into the·6· future.·7· · · · · · Writers of this important product need to·8· be able to adjust premiums to reflect emerging·9· experience.· If this was not structured as a10· guaranteed renewable product, which gives companies11· that ability, and companies couldn't raise their12· rates to reflect experience, it's highly unlikely13· that any carrier would have ever sold this type of14· insurance.15· · · · · · That would have resulted in millions more16· people spending virtually all of their savings on17· care costs and then relying on strained Medicaid18· programs for their care after depleting their19· assets.20· · · · · · Most of the earlier premium increases in21· the industry were due to lower than expected22· voluntary lapses.· Current premium increases are

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·1· more driven by claims and mortality experience.·2· This is still a relatively young industry, and many·3· companies have just recently started to get a·4· significant amount of claims experience at the older·5· ages and later policy durations which is where the·6· vast majority of claims are expected to happen.·7· · · · · · At John Hancock we are seeing more people·8· than expected living to older ages where long-term·9· care events happen.· And we are seeing a higher rate10· of claims than expected and longer lasting claims11· than expected for those who do make it to the older12· ages and after the effects of underwriting have worn13· off.14· · · · · · I would like to point out that our15· experience on this particular form is actually a16· little bit better than expected so far.· But this17· form is fairly new, and so far we've only paid about18· 4 percent of the claims that we ultimately expect to19· pay.20· · · · · · As I mentioned earlier, where our claims21· are worse than expected are at the older ages and22· later policy durations.· We have very little

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·1· business in that area on this particular form.· But·2· we do have a lot of business in that area on our·3· older similar policy forms.·4· · · · · · We're using that information on our older·5· forms to act earlier on this form.· Waiting until·6· the adverse experience emerges on this form alone·7· would result in a much larger increase needed.·8· · · · · · As an example, the 27 percent that we·9· need now, if we were to wait ten years more in order10· for the adverse experience to emerge on this form,11· it would be 65 percent rather than 27 percent.12· · · · · · With this plan we are not able to offer13· our future inflation reduction landing spot, because14· that's only available for plans with a fixed15· inflation whereas most of these plans have inflation16· that's linked to the CPI index and others have a17· guaranteed purchase option.18· · · · · · We do offer the typical benefit reduction19· option such as reducing your daily benefit maximum20· or shortening the benefit period.21· · · · · · So, thank you again for allowing me to22· address our current filing, and I would be happy to

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·1· answer any questions you may have.·2· · · · · · COMMISSIONER GRODIN:· Thank you,·3· Mr. Plumb.· Any questions from MIA staff?·4· · · · · · MR. SWITZER:· Thank you, Dave.· One of·5· the ideas that have been put forward that we·6· understand some insurers have adopted are exempting·7· policyholders over age 75 from rate increases.· I'm·8· not asking for anything definitive, but is that·9· something that off the bat is a nonstarter or that10· can be considered from your standpoint?11· · · · · · MR. PLUMB:· I think a couple of problems12· with that are, so, long-term care is a -- rates have13· to be increased on a class of business.· You can't14· single out people for a rate increase, like15· unhealthy people will have a rate increase versus16· healthy.· It has to be based on a premium class.17· · · · · · And a premium class has never been18· defined has obtained age, it's always issue age,19· benefit period, inflation option, and underwriting20· class.21· · · · · · The second potential issue with that is22· that it may be discriminatory particularly if the

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·1· company is -- if you're not going to be able to·2· raise rates above a certain age, then that means you·3· have to raise rates more for people below that age,·4· then those people are paying more than they should·5· while others are paying less than they should.·6· · · · · · So, I think there is discriminatory·7· issues there, and then the whole language around·8· rating class makes that question moot.·9· · · · · · MR. SWITZER:· Second, so -- thanks. I10· understand that what you filed effects 1,200 of your11· members in Maryland which is about 5 percent of your12· total Maryland members.· And you mentioned that13· mortality is the key assumption.14· · · · · · MR. PLUMB:· Morbidity as well, Todd.15· · · · · · MR. SWITZER:· Okay.· For this particular16· 5 percent subset if you had to pick one assumption17· that's the main driver, could you just -- is it18· morbidity?19· · · · · · MR. PLUMB:· I think for this particular20· one it's morbidity.· I'm just not sure, but I am21· fairly certain it's morbidity.22· · · · · · MR. SWITZER:· Thank you.

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·1· · · · · · MR. PLUMB:· You're welcome.·2· · · · · · MR. MORROW:· Let me ask you real quick.·3· Does your answer to Todd's first question change if·4· the General Assembly sides as a matter og policy·5· they want to put in that 75 year old age level?·6· · · · · · MR. PLUMB:· I'm not a lawyer.· I wish I·7· was sometimes.· But I don't know if there is a·8· determinatory issue and the General Assembly has·9· said it's okay to discriminate, does that leave the10· company off the hook for discrimination lawsuits. I11· don't know the answer to that.12· · · · · · MR. MORROW:· I'm thinking in terms of the13· numbers.· I'm not asking about that.14· · · · · · MR. PLUMB:· I'm sorry, I don't15· understand.· So, the issue of not raising rates for16· people above a certain age and raising rates more17· for people below that age?18· · · · · · MR. MORROW:· Right.· Does that --· does19· that actually help the experience?20· · · · · · MR. PLUMB:· If there were no21· discriminatory issues, I think that would be fine22· except for when a company only has people above a

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·1· certain age, it could be devastating for them.· And

·2· some of the older companies that are in dire straits

·3· probably are more in that situation where they

·4· couldn't get any rate increases.

·5· · · · · · MR. MORROW:· Okay.· Thank you.

·6· · · · · · COMMISSIONER GRODIN:· Thank you,

·7· Mr. Plumb.

·8· · · · · · We now have Massachusetts Mutual Life

·9· Insurance Company, Mr. Fawthrop.· You have to spell

10· that for the Court Reporter.

11· · · · · · MR. FAWTHROP:· Good morning.· My name is

12· Roland Fawthrop F-A-W-T-H-R-O-P.· I'm senior actuary

13· at Massachusetts Mutual Life Insurance Company,

14· MassMutual, responsible for the health product lines

15· which include our individual long-term care

16· insurance products, which is marketed under the name

17· Signature Care.

18· · · · · · On behalf of MassMutual, thank you for

19· the opportunity to discuss MassMutual's request for

20· in-force premium increases for our closed block of

21· individual long-term care insurance policies.

22· · · · · · Before discussing our request, I want to

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·1· first provide a brief background on MassMutual's LTC

·2· business.

·3· · · · · · MassMutual, a mutual life insurance

·4· company, established in 1851 in Springfield,

·5· Massachusetts, began selling long-term care

·6· insurance in 2000 with our Senior Signature Care 200

·7· series.

·8· · · · · · Since releasing that first product,

·9· MassMutual has introduced five subsequent series -

10· Signature Care 300, 400, 500, 511, and 513.· Our

11· closed block which is the subject of this pending

12· premium rate increase request includes the Signature

13· Care 200, 300 and 400, 500 and 511 series.

14· · · · · · I would also like to note that despite

15· other companies ceasing sales of their products,

16· MassMutual remains one of those companies committed

17· to selling individual long-term care insurance as we

18· continue to market the 513 series for new sales and

19· are in the process of filing our next series,

20· Signature Care 600.

21· · · · · · As a business we closely monitor current

22· and emerging market and regulatory conditions as

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·1· well as our own and the industry's claims experience·2· to insure that the policy features and rates align·3· to meet today's and tomorrow's maturing population.·4· · · · · · Consistent with what other carriers have·5· found, our emerging and expected experience is·6· running more adverse than previously expected.· More·7· specifically as described in our filing, lower·8· mortality and lapse rates result in a much larger·9· pool of expected LTC claims, and higher morbidity10· which is from a combination of higher than expected11· incidence rates and lower -- longer claims durations12· result in significantly higher expected claims13· files.14· · · · · · While lower interest rates have a15· meaningful impact, the biggest drivers of the16· difference in expected experience are mortality and17· morbidity.· Given these factors, our company's18· senior leadership made the difficult decision to19· file for premium rate increases.· This is the first20· LTC rate increase request ever made by MassMutual.21· · · · · · These premium rate increases are intended22· to mitigate losses expected to emerge in the future.

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·1· They are not to recover any past losses already·2· incurred.·3· · · · · · In total MassMutual currently has over·4· 73,000 long-term care insurance policies in force·5· nationally covering about 90,000 insureds as some·6· policies were issued as joint coverage.·7· · · · · · About 54,000 policies or 70,000 insureds·8· are subject to our nationwide rate increase request.·9· Of that amount, there are approximately 2,70010· policies or 3,700 insureds in force in Maryland.11· · · · · · The premium increases that MassMutual has12· filed nationwide are set to achieve a rate level13· consistent with that on our currently marketed14· 513 series.15· · · · · · The filed increases vary by rate series16· and all available options and riders.· Individual17· policy rate increases are then capped at one hundred18· percent.19· · · · · · Recognizing Maryland's 15 percent20· regulatory cap on increases, MassMutual initially21· requested a multi year phased-in rate increase such22· that no policy owner would receive a rate increase

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·1· more than 15 percent in any single calendar year.

·2· · · · · · The cumulative rate increase would then

·3· be capped at 145 percent on each individual policy,

·4· which is the actuarial equivalent of the nationwide

·5· request.

·6· · · · · · At the request of the Maryland Insurance

·7· Administration, we've amended our filing to limit

·8· this request to just one rate increase capped at

·9· 15 percent.· We believe the rate increase is both

10· justified and needed.

11· · · · · · We anticipate filing additional premium

12· rate increases in the future in order to bring

13· Maryland premium rates on par with the nationwide

14· rate level.

15· · · · · · Next I will spend a few minutes

16· discussing MassMutual's communication plan which was

17· designed to be as transparent as possible with

18· policy -- policy owners, producers, and insurance

19· regulators.· We know that this is a priority for

20· Commissioner Redmer and the MIA.

21· · · · · · Prior to our initial premium increase, we

22· engaged with State regulators including Maryland to

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·1· make you aware of the filing and communication plans·2· in advance of any anticipated media coverage.· We·3· also engaged with our producers so that they would·4· be prepared to respond to policy owner questions.·5· · · · · · Lastly we want policy owners subject to·6· the rate increase request to hear this news directly·7· from the company and not from the media, word of·8· mouth or an individual publication.·9· · · · · · As such we sent a letter to our policy10· owners notifying them of the potential rate increase11· on their long-term care policy.12· · · · · · Once we have regulatory approval and have13· implemented the new premium rates in our14· administrative systems, the company will send a15· formal increase notification approximately 90 days16· prior to the effective date of any rate increase17· with a list of options available to impacted policy18· owners.19· · · · · · The 90 day notification period is meant20· to provide policy owners time to consider their21· individual circumstances and options available to22· them, and to make sound, informed decisions about

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·1· their coverage.·2· · · · · · MassMutual is sensitive to the impact·3· that rate increases may have on policy owners.·4· Policy owners effected by the premium increase will·5· have the option of reducing their policy benefits to·6· provide flexibility of choice for those who wish to·7· maintain a premium level similar to what they were·8· paying prior to the rate increase.·9· · · · · · The benefit reduction options available10· to policyholders to mitigate the proposed rate11· increase may include reducing the daily benefit12· amount, extending the elimination period, reducing13· the benefit period, reducing the amount of inflation14· protection and/or removing optional riders.15· · · · · · MassMutual has requested to voluntarily16· offer a contingent benefit upon lapse to all17· insureds affected by the premium increase, even if18· the increase is not considered substantial.19· · · · · · In closing, MassMutual understands that20· the rate increase request is neither popular or21· ideal.· However in being transparent and empathetic22· to both our policyholders and to you, the regulator,

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·1· MassMutual hopes to make this process as smooth as·2· possible.·3· · · · · · Thank you for allowing me to participate·4· in today's hearing.· I am happy to answer any·5· questions you have.·6· · · · · · MR. SWITZER:· Thanks very much.· It's a·7· little bit of a variation of the question that I·8· asked Mr. Plumb, the idea of exempting someone, a·9· policyholder who is age 75 or older and has had a10· policy for 10 years or more, understanding if you11· echo John Hancock's concerns, I would be interested12· in that.13· · · · · · But barring the legal issues for the time14· being, actuarially would this variation, reducing15· the actuarial impacts somewhat, comments on the16· feasibility of the idea or perhaps a modification of17· the idea, please.18· · · · · · MR. FAWTHROP:· So, I do echo the comments19· from John Hancock.· The contribution principle which20· is an actuarial bedrock includes making sure that21· you are not shifting the cost from one group to22· another group.

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·1· · · · · · I am not an attorney, but I do have some·2· similar concerns about potential litigation that·3· would follow that.· And there would likely -- if·4· you're not -- if you're capping coverage or·5· increases above a certain age, 75, 80, whatever that·6· age may be, there will be an affect on -- with some·7· companies that they will have to pass that increase·8· onto other policyholders.·9· · · · · · I don't have a great solution at hand for10· that right now.11· · · · · · MR. SWITZER:· I appreciate that.· How12· about the new planning on your Signature 600, what13· if your brand new plan you knew up front that was a14· policy feature theoretically?15· · · · · · MR. FAWTHROP:· If that's a policy feature16· theoretically and is something that we could build17· into the policy form, that protects us much better18· than doing something where we may be exposed.19· · · · · · MR. SWITZER:· Right.· Last question.· So,20· as you aligned, 3,700 Maryland members affected by21· the filing you have with us.· That's about 8022· percent of your total Maryland block.

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·1· · · · · · You mentioned that the rate increase is·2· not to recoupe any past losses.· One of the unique·3· things that I noticed in looking at the Form 5, the·4· financial statements, is that for all of Maryland's·5· business, MassMutual's business in Maryland, the·6· loss ratio so far I think through duration of '17,·7· it's 14 percent.· Nationwide it is 14 percent.·8· · · · · · I see for these forms, the 80 percent·9· subset, the loss ratio so far is 10 percent.· By our10· models we expect it to be 30 to 40 percent.11· · · · · · So, I'm just -- have you incurred losses12· so far?· Are you -- are there past losses to recoup13· so far?14· · · · · · MR. FAWTHROP:· The -- it's a great point.15· There are not material losses in the past.· What16· happens with the loss ratios when you have17· significantly lower lapse rates and mortality rates,18· is there is a much larger pool of people than you19· anticipated.20· · · · · · MR. SWITZER:· Right.21· · · · · · MR. FAWTHROP:· That pool in the early22· years is paying premium which will drive your early

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·1· duration lapse loss ratios down, but has a·2· significantly negative impact on those long-term·3· loss ratios.·4· · · · · · So, most of the -- the need, I'd say·5· almost all of the need for the premium rate increase·6· is from what we expect to happen in the future.·7· · · · · · MR. SWITZER:· Thanks very much.·8· · · · · · MR. MORROW:· I just want to make sure I'm·9· clear about one thing.· You mentioned this is the10· first rate increase request ever by MassMutual.11· · · · · · MR. FAWTHROP:· That's correct.12· · · · · · MR. MORROW:· Nationwide, not just in13· Maryland?14· · · · · · MR. FAWTHROP:· That's correct.15· · · · · · MR. MORROW:· And just I assume this is16· going to come up later so I'm just going to ask it17· now, have you ever considered not paying dividends18· or not paying as large a dividend, and taking some19· of that money to use it to cover some of the20· long-term care expected experience or losses later?21· · · · · · MR. FAWTHROP:· So, even with this premium22· rate increase that we are asking for, the loss

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·1· ratios are still well -- nationwide increase are·2· still well above a hundred percent.· So, our·3· participating policyholders, if we were to even·4· receive the full nationwide request, would still be·5· sharing a significant piece of the claims experience·6· in the future.·7· · · · · · That said Massachusetts Mutual is a·8· participating policy owned company.· And to what·9· extent should all of our in-force policyholders pay10· for the significant increase in claims cost for a11· particular block?· Should they pay for all of it, a12· part of it?13· · · · · · So, there was a lot of discussion about14· that.· And we thought we had ended up with an15· equitable decision.16· · · · · · MR. MORROW:· So, it has been discussed.17· · · · · · MR. FAWTHROP:· It has been.18· · · · · · MR. MORROW:· Okay.· Very good.· Thank19· you.20· · · · · · MR. ZIMMERMAN:· Just one question for you21· regarding the assumptions, I see that Milliman, you22· worked with Milliman on the filing.

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·1· · · · · · MR. FAWTHROP:· Yes.·2· · · · · · MR. ZIMMERMAN:· So, what percentage -- is·3· there any credibility with actual company experience·4· for the assumptions, or are all they Milliman based?·5· · · · · · MR. FAWTHROP:· The assumptions are·6· Milliman based, but they did use our experience and·7· there was credibility as to the experience.·8· · · · · · MR. ZIMMERMAN:· Okay.· Thank you.·9· · · · · · COMMISSIONER GRODIN:· If I could just10· confirm, did you say that you had sent a letter to11· your policyholders already in anticipation?12· · · · · · MR. FAWTHROP:· Yes.· We first filed for a13· rate increase I believe it was on May 20th in the14· Commonwealth of Massachusetts, which is our15· domiciliary state.· That was on Monday.· By Friday16· of the same week we had sent -- mailed the letter to17· all of our 54,000 policy owners letting them know18· that we're beginning this process.· And -- and that19· they could call into our administrative office with20· any questions and also work with their producer to21· answer any questions but that it was going to be a22· lengthy process.

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·1· · · · · · We did not want them to hear about that·2· from an outside source.· We wanted to be as·3· transparent as we could with the policyholders.·4· · · · · · COMMISSIONER GRODIN:· Thank you,·5· Mr. Fawthrop.·6· · · · · · Next up we have MedAmerica Insurance·7· Company, Mr. Kinney.·8· · · · · · MR. KINNEY:· Good morning, Deputy·9· Commissioner Grodin, Mr. Switzer, Administration and10· guests.· Thank you for the opportunity to appear11· regarding our long-term care premium rate increase12· filing.13· · · · · · My name is Patrick Kenny.· I'm the14· manager and actuary for LTC pricing at MedAmerica15· Insurance Company.· MedAmerica sold standalone16· long-term care policies nationwide in 1987 through17· early 2016.18· · · · · · Although the company ceased sales at that19· time, we remain committed to provide promised LTC20· benefits to over 100,000 people across the country21· including almost 400 in Maryland who rely on us to22· continue their coverage long into the future.

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·1· · · · · · Adverse experience in policy persistency·2· and morbidity and interest earnings threatens the·3· financial health of the LTC industry.·4· · · · · · MedAmerica is a monoline LTC company with·5· no other insurance products to offset projected·6· shortfalls from long-term care coverage.· We believe·7· the premium rate increases are necessary now to·8· insure our ability to pay LTC claims in the long·9· term.10· · · · · · We need to place our closed block LTC11· products on a sound financial footing for the12· future.· Today's hearing concerns our requested 4.213· percent premium rate increase on our "Simplicity ii"14· product.15· · · · · · This policy form was issued in Maryland16· from June 2008 through April 2014 covering 14017· insureds in the state.18· · · · · · Our current request is a follow-up to a19· 15 percent rate increase filed by the Maryland20· Insurance Administration in December 2015 and the21· 4.3 percent increase submitted in March 2017 and22· filed in January of this year.

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·1· · · · · · If accepted by the Administration, the·2· current 4.2 percent request will bring the·3· cumulative rate increase in Maryland up to the·4· 25 percent increase that MedAmerica determined to be·5· necessary to certify to rate stability on this·6· policy form.·7· · · · · · Implementation of this rate increase will·8· take place no earlier than one year after·9· implementation of the prior increase, so that no10· policyholder will receive more than one rate11· increase within 12 months.12· · · · · · Since the time of our 2015 and 2017 rate13· increases, MedAmerica has updated its actuarial14· assumptions for morbidity and persistency, including15· two years of additional claims experience.· And we16· actually increased our interest assumption from 4.517· percent to 5.0 percent which is closer to the 5.2518· percent assumed in the original pricing increase of19· the product.20· · · · · · The net effect of these assumptions is21· that the projected lifetime loss ratio prior to any22· rate increases has not changed significantly from a

Page 42

·1· prior filing.· Deterioration in other actuarial·2· assumptions was offset by the change in the interest·3· rate due to the company's revised future investment·4· policy.·5· · · · · · We concluded that the original 25 percent·6· cumulative rate increase remains appropriate, and·7· the current request for a 4.2 rate increase to take·8· effect in 2019 will bring us to that level.·9· · · · · · Similar to prior increases, MedAmerica is10· offering insureds affected by the premium increase11· the option of reducing their policy benefits to12· provide flexibility of choice for those insureds who13· wish to maintain the premium level similar to what14· they were paying prior to the rate increase.15· · · · · · Furthermore MedAmerica is offering16· contingent nonforfeiture benefit to all insureds17· affected by the rate increase which means the18· policyholder who lapses premium payments due to the19· requested rate increase remains eligible to receive20· some level of paid-up benefit in the future.21· · · · · · To help consumers navigate their options22· to continue premium payments, accept a reduced

Page 43

·1· paid-up CNF benefit or find a benefit reduction·2· option that best suits them, our insureds are·3· encouraged to call our toll free customer service·4· phone number.· Because each policyholder is unique,·5· MedAmerica works with each person individually.·6· · · · · · MedAmerica takes pride in providing·7· quality claims service to our insureds.· 95 percent·8· of claimants surveyed rate their experience with·9· MedAmerica as above average or excellent.· And our10· average time to pay a claim is six days or less.11· · · · · · We believe this service excellence is a12· critical component to fulfilling our promises of13· taking care of our insureds, and we plan to continue14· to provide this level of service going forward.15· · · · · · In closing, I would like to reiterate16· that despite the fact that we no longer sell17· long-term care insurance, MedAmerica remains18· committed to delivering on all of our promises to19· our customers.20· · · · · · Granting actuarially justified rate21· increases will help assure we have the financial22· strength to continue providing the benefits and

Page 44

·1· service our insureds expect and desire.·2· · · · · · Thank you for your time and·3· consideration.· I am happy to answer any questions·4· at this point.·5· · · · · · COMMISSIONER GRODIN:· Thank you,·6· Mr. Kinney.·7· · · · · · MR. SWITZER:· Thanks very much.· So, I·8· gather that the 140 members, Maryland members that·9· your current submission applies is about 28 percent10· of your total Maryland members, something like that?11· · · · · · MR. KINNEY:· We have about 400 in12· Maryland.13· · · · · · MR. SWITZER:· I also -- to get context14· that so far these members have lifetime had an15· increase of about 19.9 percent.· You want to get up16· to the 26 or --17· · · · · · MR. KINNEY:· 25.18· · · · · · MR. SWITZER:· 25.· So, my question is,19· enrollments at 140, you stated it's a closed block,20· can only decline obviously.· Roughly estimate that21· the 4.2 percent that was requested would represent22· about $15,000 in additional revenue per year.· Is

Page 45

·1· there a diminimus level where enrollment maybe

·2· reaches below a hundred or below 50 where maybe

·3· it's -- the increases aren't -- aren't worth all the

·4· filing just because you've got to such low numbers?

·5· It's just something that has come up before, and I'm

·6· curious as to your thoughts.

·7· · · · · · MR. KINNEY:· For us that number would be

·8· well below a hundred.· More like single digit

·9· policyholders before we consider not submitting as

10· part of a nationwide rate increase.

11· · · · · · MR. SWITZER:· As part of the nationwide.

12· Okay.· Thank you.

13· · · · · · COMMISSIONER GRODIN:· I'm just curious,

14· you may have mentioned this, do you know the average

15· age of your policyholders in Maryland?

16· · · · · · MR. KINNEY:· I don't have that statistic.

17· · · · · · COMMISSIONER GRODIN:· Okay.· Thank you --

18· or, I'm sorry.

19· · · · · · MR. ZIMMERMAN:· I was looking at the

20· filing, and we're at an average duration of 8, 9

21· approximately for this policy series.· I noticed

22· that the AD loss ratio for the cumulative loss ratio

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·1· is about 1.6.· You expect that at this time to be·2· about 5 percent, the actual loss ratio is 8 percent.·3· So, I'm just wondering if there has been any·4· analysis done to determine what has caused this at·5· such an early duration.·6· · · · · · MR. KINNEY:· In this case it's mostly·7· persistency.· And since our last study, we've·8· updated our morbidity assumptions as well.· That's·9· contributed a little bit to the deterioration.· You10· can see that the claims --11· · · · · · THE REPORTER:· Speak up.12· · · · · · MR. KINNEY:· The claims in the last two13· years, the actual experience has been worse than14· projected and two years ago as well.15· · · · · · MR. ZIMMERMAN:· Thank you.16· · · · · · COMMISSIONER GRODIN:· Thank you very17· much.· All right.· Next we have Senior Health18· Insurance Company of Pennsylvania.· Mr. Anderson.19· · · · · · MR. ANDERSON:· Good morning.· I would20· like to thank Deputy Commissioner Nancy Grodin and21· her staff and the others with Maryland Insurance22· Administration for giving me the opportunity to

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·1· speak on behalf of Senior Health Insurance Company·2· of Pennsylvania, otherwise known as SHIP.·3· · · · · · My name is Duane Anderson.· I'm·4· responsible for the rate increase effort at SHIP as·5· well as supporting functions including IT and·6· operations.· We work closely together to evaluate·7· whether SHIP's current premium rates are an accurate·8· reflection of anticipated future claims based on·9· actuarial projections.10· · · · · · Milliman is our partner in the actuarial11· work.· In the past years they have been here with us12· at this meeting.· Today they couldn't be here.13· · · · · · My plan today is to provide a brief14· company history, the rate increases SHIP is seeking,15· and alternative options to the rate increases.16· · · · · · To be sure, SHIP is aware of the extreme17· difficulty these rate increases put upon18· policyholders and continues to explore ways to19· mitigate the necessary rate increases.20· · · · · · I would like to start with a brief21· company history.· SHIP was formed in 2008.· It's22· legacy business consists of long-term care blocks

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·1· from American Travellers and Transport Life·2· Insurance Company which merged in 1998 and became·3· Conseco Senior Health Insurance Company.·4· · · · · · In 2008 the company was transferred to·5· Senior Health Care, an oversight trust.· The trust·6· was given the responsibility to take ownership of·7· SHIP and oversee the runoff of its closed blocks of·8· long-term care insurance.·9· · · · · · The trust and SHIP operate exclusively10· for the benefit of the policyholders, and we seek to11· maintain solvency through the remaining life of the12· company so that all obligations to policyholders may13· be met.14· · · · · · SHIP exists for the sole purpose of15· meeting long-term care policyholder needs.· We16· operate without a profit motive, and we will never17· attempt to recover past losses.18· · · · · · The trust is controlled by four former19· Commissioners of Insurance and the former president20· of the Society of Actuaries.21· · · · · · When SHIP was formed in 2008, there were22· 150,000 active policyholders on policies written

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·1· between the late '70s and 2003.· Today there are·2· 57,000 total active policyholders across the states.·3· · · · · · In Maryland 4,300 policies were·4· originally written on 20 policy forms.· Today there·5· are 1,092 active policyholders in Maryland.· Again I·6· believe the denominator is 214, I heard earlier in·7· the presentation.·8· · · · · · SHIP's decision to file for rate·9· increases was made after in-depth analysis of the10· experience relating to policies that are the subject11· of these filings.12· · · · · · SHIP has filed for these increases in13· light of the information that has emerged over the14· years these policies have been in force, including15· claims experience and persistency.16· · · · · · Projected claims are higher than17· expected, compounded by persistency which is higher18· than expected.· We are requesting a 15 percent rate19· increase capped due to the Maryland limit on20· policies with a 5 percent compounded inflation21· benefit with unlimited duration.22· · · · · · For Maryland this impacts all 1,092

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·1· policyholders.· In our standing rate filing SHIP has·2· shown we were able to justify a multiple over·3· 100 percent premium rate increase in Maryland.· SHIP·4· is not seeking that higher rate.· However, we will·5· need to continue to file rate increases in Maryland·6· due to the rate cap of 15 percent.·7· · · · · · Given the rate increases necessary, in an·8· effort to provide policyholder options to retain·9· benefits under their policies, SHIP has proposed a10· variety of options for the policyholders to mitigate11· the rate increase.12· · · · · · Under the first option, SHIP is offering13· our policyholders to drop their inflation going14· forward while maintaining their current accumulated15· benefits, with a reduction of premium of 40 percent.16· This means the current daily benefit amount will17· remain constant in the future.18· · · · · · Additionally SHIP is offering an19· opportunity for a 30 percent premium reduction in20· exchange for an increase in the elimination period21· zero to 110 days.22· · · · · · SHIP is also offering policyholders the

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·1· ability to select a nonforfeiture option and avoid·2· paying any future premiums.· Under this option, SHIP·3· will pay for the eligible expenses up to the total·4· premium that's been paid to-date less any benefits·5· that have been paid on the policy thus far.·6· · · · · · Finally, policyholders can select other·7· options of reduced benefits such as benefit periods·8· and daily benefit amounts in an effort to reduce or·9· keep premiums at their current rates.10· · · · · · As mentioned SHIP understands the11· challenges rate -- challenges rate increases have on12· our policyholders.· However, rate increases are13· needed to help insure future premiums will be14· adequate to fund the anticipated claims.15· · · · · · We actively manage and monitor the16· performance for our business updating actuarial17· studies on an annual basis to make sure we will be18· able to be there when our policyholders needs us19· most which is at the time of claim.20· · · · · · We will continue this dedication in the21· future.· To restate, the trust and SHIP operate22· exclusively for the benefit of policyholders, and we

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·1· seek to maintain solvency through the remaining life·2· of the company so that all obligations of·3· policyholders may be met.·4· · · · · · I would like to thank everyone for·5· participating today for their time and attention,·6· and we're happy to take questions from the Maryland·7· Insurance Administration now.·8· · · · · · COMMISSIONER GRODIN:· Thank you,·9· Mr. Anderson.10· · · · · · MR. SWITZER:· Thanks again.· So, I see11· that your situation is a little different in that12· from the Form 5 lifetime loss ratio in Maryland is13· 103 percent.· So, you're paying more in claims than14· premium.· I recognize that.15· · · · · · I just want to make sure that I16· understand what you said, that I'm doing the math17· right.· That I got that the lifetime increases on18· this form so far have been 300 percent.· And that19· your need, as you calculated it, is 100 percent.20· So, you will need to keep the -- the company sees21· themselves needing to keep filing 15s until you --22· to get a lifetime increase of about 400 percent.

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·1· · · · · · MR. ANDERSON:· Uh-huh.·2· · · · · · MR. SWITZER:· Thanks.·3· · · · · · COMMISSIONER GRODIN:· Thank you,·4· Mr. Anderson.·5· · · · · · MR. ANDERSON:· Thank you.·6· · · · · · COMMISSIONER GRODIN:· That concludes the·7· portion of this program to hear testimony from the·8· carriers.· I would like to turn now to the·9· individuals who have signed up to speak on our10· sheet.· The first one is Mr. Burgan.11· · · · · · MR. BURGAN:· Good morning, everyone.· My12· name is Elwood Barry Burgan.· I am a policyholder.13· I'm not an attorney; I'm not an insurance agent.14· But I am policyholder.15· · · · · · THE REPORTER:· Hold it closer.16· · · · · · MR. BURGAN:· Is a fellow by the name of17· Ben Bigalo (phonetic), is he still with your agency?18· I spoke with Ben -- let's see.19· · · · · · MR. MORROW:· Ben Legow?20· · · · · · MR. BURGAN:· Pardon me?21· · · · · · MR. MORROW:· Ben Legow.· L-E-G-O-W.22· · · · · · MR. BURGAN:· Hold on.· Hold on a second.

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·1· I have it here.· I have his name here.· It has to do·2· with my wanting to know why the Section 11-704 by·3· the Maryland Insurance Code has -- is allowing these·4· insurance companies to increase my rate or anyone's·5· rate an additional 15 percent per year.·6· · · · · · Now in calling down to the agency, Ben·7· Legow, I'm sorry, L-E-G-O-W.· (Inaudible.)·8· · · · · · THE REPORTER:· You've got to put it to·9· your mouth so I can hear.10· · · · · · MR. BURGAN:· Is Ben Legow still here?11· · · · · · MR. MORROW:· He's not.12· · · · · · MR. BURGAN:· He's not.· Thank you. I13· also spoke with -- because I have a letter on his14· behalf, and it states that if -- that I was not to15· have an increase bestowed upon me this year, but yet16· I received a letter stating from CNA that I have17· been increased the 15 percent as authorized by MIA.18· · · · · · Now, I also called and spoke with -- is19· there a Mary Kwei here?· Is that how you --20· · · · · · MS. KWEI:· Mary Kwei.21· · · · · · MR. BURGAN:· Kwei, that's you.· Okay. I22· spoke with you several times this past week, I

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·1· believe in regards to my policy.· And it has to do·2· with the age stipulation.· I even had my State·3· Senator whom I contacted try to get a clarification·4· on the age stipulation that's incorporated under·5· your letterhead, MIA letterhead, stating that there·6· can be increase up to -- up to -- up to the age of·7· 75.·8· · · · · · Now, it's clearly in writing here under·9· your letterhead.· Up to means that I can be -- have10· this increase to my policy but up to the age of 75.11· I will be 75 next year.· So, even though I received12· a letter from Ben Legow telling me that I wouldn't13· be increased, I can substantially foresee the14· increase to my policy at this time.15· · · · · · But I am on a fixed income.· I'm a16· disabled veteran.· I'm on a fixed income.· I cannot17· continually afford 15 percent year after year after18· year after year after year.· I just can't do it.19· So, I need your help.20· · · · · · As a veteran, it's the greatest country21· in the world.· I fought for this country, and I'm22· proud to say that I fought for this country.· But I

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·1· need your help.· And I'm sure I'm not the only one·2· that's in that category, that age category.·3· · · · · · But again it clearly states in your·4· letterhead up to the age of 75.· So, I employ you to·5· help me.·6· · · · · · I also had contacted the news media and·7· left a message with -- with one of the news·8· broadcasters concerning this matter.· And I have·9· also consulted an attorney.· And I was told to ask10· if this up to the age of 75 does not concur, then11· where is it in writing that stipulates that it does12· not incur.· Where I have it in writing here, where13· is it that it's not to be.14· · · · · · MR. MORROW:· So, Mr. Burgan, I don't know15· the specifics of your case.· Obviously you talked to16· Ben and Mary.· But I'm happy to talk with you with17· Mary after -- after this hearing, and I'm happy to18· look at the letter.19· · · · · · MR. BURGAN:· Yeah.20· · · · · · MR. MORROW:· Again --21· · · · · · MR. BURGAN:· I can show it to you.· This22· is evidence, however you want to do it.

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·1· · · · · · MR. MORROW:· I'm happy to talk to you

·2· afterward.

·3· · · · · · MR. BURGAN:· Maryland Insurance

·4· Administration.

·5· · · · · · MR. MORROW:· I understand.· I understand

·6· your issue, and I hear you very clearly.· You

·7· cannot --

·8· · · · · · MR. BURGAN:· Please.· I need help.· I'm

·9· sure I'm not the only one, but I am a disabled

10· veteran.· I am on a fixed income, and I need your

11· help.

12· · · · · · MR. MORROW:· Very good.· And we will talk

13· when the meeting is over about your specific

14· situation.· I will be happy to look at the letter.

15· · · · · · MR. BURGAN:· Thank you for your time.

16· · · · · · MR. MORROW:· Thank you.

17· · · · · · COMMISSIONER GRODIN:· And next is Mr. --

18· it's either Huntman or Hutman.

19· · · · · · MR. HUTMAN:· Hutman.

20· · · · · · COMMISSIONER GRODIN: Hutman, thank you.

21· · · · · · MR. HUTMAN:· Thank you, Deputy

22· Commissioner Grodin, members of the MIA staff for

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·1· the opportunity to talk to me.

·2· · · · · · My name is Ed Hutman.· I'm an insurance

·3· broker.· I represent a number of different

·4· companies.· I have placed policies with 10 different

·5· carriers since I started writing long-term care

·6· insurance in 1991.· I have well over a thousand

·7· Maryland clients many of whom will be affected by

·8· the outcome of today's hearing.

·9· · · · · · My wife and I are owners of two long-term

10· care policies - one purchased from CNA in 1991 and a

11· Genworth policy purchased in 2001.

12· · · · · · Since I last testified at a MIA hearing

13· in April of 2016, some things have changed for the

14· better, but unfortunately some have not.· I applaud

15· the MIA that it has taken steps to increase

16· transparency through these Statewide meetings and

17· information provided on the MIA website.· Both have

18· helped the consumer gain a better understanding of

19· what's happening to their policies when an

20· MIA-approved rate increases will occur, and for

21· those who have the background and who can understand

22· the filings, the company's perspective of why they

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·1· think increase in premiums is warranted.·2· · · · · · I'm happy for the transparency.· I hope·3· it continues.· But the unaddressed question remains,·4· why should poor performance numbers in large part·5· caused by insurance company business errors made·6· years ago be a policyholder problem?· This is the·7· elephant in the room.·8· · · · · · I assume that the data provided by the·9· companies in their rate increase request filings are10· correct.· If past history is any indicator, the MIA11· will look carefully at the numbers, carefully12· evaluate these numbers.· And if the numbers meet MIA13· requirements, the rate increases will be approved.14· · · · · · But what if the premise underlying the15· numbers is false?· What if the numbers are16· misleading?· How are adjustments for business errors17· reflected in the numbers presented in the filings?18· Sometimes numbers tell only part of the story.19· · · · · · When one of two parties to an agreement20· make a business mistake, which one should suffer the21· consequences of that mistake?· It appears the answer22· continues to be the Maryland consumer.

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·1· · · · · · In the process used by MIA to determine·2· whether increases should be granted, how are the·3· companies held to account for poor business·4· decisions they make?· What metric does the MIA take·5· into consideration in weighing the extent to which·6· underperformance of these policies is caused by·7· business mistakes made by the insurance companies·8· many years ago?·9· · · · · · How are the companies held to account for10· the errors they made in establishing overly11· aggressive or inadequate underwriting standards and12· pricing for the long-term care policies they sold?13· How are the companies held to account for the14· considerable morbidity assumption errors they made?15· · · · · · How are the companies held to account for16· the true but misleading statements made in consumer17· brochures they provided that induced the Maryland18· consumer to purchase their long-term care insurance19· policies?20· · · · · · Let me give you a little bit of history.21· I started selling long-term care insurance in 1991.22· Another thing that occurred in 1991 was the

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·1· publishing in the New England Journal of Medicine, a·2· Kemper-Murtaugh study.· And I'm sure all of the·3· actuaries in the room are familiar with that.·4· · · · · · And this is where we derived the data·5· that two out of five people would likely need·6· long-term care.· That half of the people would·7· require care for 90 days or less, and that of the·8· other half, one out of f ive would require care for·9· five years or longer.10· · · · · · This is the most extensive study that's11· been conducted in long-term care at the time.· 199112· this information was known.· By 1996 the companies13· realized that their underwriting requirements were14· wide of the mark, and some of the companies started15· to make changes in their underwriting standards.16· · · · · · If a person had had a stroke, they no17· longer could get a policy with some of the carriers18· as an example.· By the end -- by 1998 the companies19· knew that their persistency numbers were wrong.· Way20· wide of the mark.21· · · · · · So, let's fast forward to 19 -- to 2001.22· Kemper-Murtaugh study 10 years ago.· Okay?· 1996

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·1· they knew the underwriting was wrong.· 1998 they·2· knew the persistency numbers were wrong.· And·3· companies had already started to make the changes.·4· · · · · · So, it's 2001, and let's put on your·5· consumer hat.· Each of us in this room is a·6· consumer.· What if you were purchasing a long-term·7· care policy and the inside cover of the Genworth·8· policy brochure, one of the three companies that·9· you're considering states, while GE's long-term care10· division reserves the right to raise future premiums11· for all policyholders by State, it has never had to12· do so since it pioneered long-term care insurance13· more than 25 years ago.· And your premiums will14· never increase due to changes in your health status15· or age.16· · · · · · Or if you look at the second carrier, the17· first statement in the brochure was John Hancock, a18· name you can trust.· Rely on us, your partner in19· care.· Turn to a leader in long-term care insurance.20· When it comes to long-term care insurance, you want21· to be sure that the company behind your policy is in22· it for the long term.· Established 140 years ago,

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·1· John Hancock is a pioneer in the long-term care·2· field, issuing our first policy in 1997.· And today·3· we serve more than 300,000 long-term care insurance·4· policyholders.·5· · · · · · Or do you look at MassMutual?· Who touts·6· its financial strength and states it has paid·7· dividends to participating policyholders every year·8· since 1869.· Yet is requesting a rate increase·9· today.10· · · · · · What are you, the Maryland consumer, to11· infer from these representations?· Wouldn't you12· reasonably assume that these companies with so much13· financial strength and experience knew what they14· were doing and had priced their policy based on15· knowledge and experience.16· · · · · · I have an 86 year old, an 80-year old17· couple who have seen their premiums almost double as18· a result of the five rate increases that have been19· granted by MIA since 2008.· They made carefully20· considered planning decisions based on the21· reasonable expectation that the insurance company22· knew what it was doing.· After all in the policy

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·1· brochure it said that the company had never had a·2· rate increase.·3· · · · · · They have paid $98,000 in premiums·4· to-date.· They will continue to pay premium·5· increases because they feel they have no other·6· viable option.· They don't want to reduce their·7· coverage because they see friends and family,·8· contemporaries needing care as they age.· However,·9· as these increases have continued, I see more and10· more of my clients compromise their original intent11· when they purchased this important coverage by12· reducing their benefits or in some cases lapsing13· their policies because the premiums have become too14· high.15· · · · · · Nonforfeiture benefits provide at best a16· very few months of coverage.· The decisions they17· have been forced to make because of their financial18· circumstance will leave them with greatly reduced19· benefits at the time they need care.20· · · · · · When they asked me, Ed, when can I expect21· these rate increases to stop?· All I can tell them22· is I don't know.· And the MIA is limited in what it

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·1· can do when an insurance carrier requests a rate·2· increase, and that they should expect the rate·3· increases to continue.·4· · · · · · We all look to the MIA not only to review·5· carefully all rate increase requests but to protect·6· the consumer by giving the appropriate pushback to·7· these requests.· It's up to the MIA to help build on·8· the transparency steps that have already been made·9· by taking the additional steps necessary to create10· the stable environment necessary to rebuild consumer11· confidence in this important coverage.12· · · · · · It's time to put an end to the seemingly13· endless rate increases which not only hurt the14· consumer but the State of Maryland as well because15· of the additional burden that will be placed on16· Medicaid.17· · · · · · It's time for the companies to accept18· responsibility for their significant mistakes and19· stop knocking on MIA's door asking for relief from a20· situation that they created.21· · · · · · From the MIA website, the Agency's goal22· is to provide efficient, effective service to both

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·1· the consumers of insurance products and the·2· insurance industry.· The Maryland Insurance·3· Administration best serves its core constituent by·4· assuring fair treatment of consumers.·5· · · · · · By what measure can these constant·6· increases be considered fair?· If the problem is·7· that the MIA believes the law limits its efforts on·8· behalf of the Maryland consumer, then let us know·9· what legislation needs to be enacted to untie your10· hands.11· · · · · · If the MIA believes that based on current12· law that it must continue to permit these rate13· increases, I echo my colleague Karen Kerland's14· written testimony in suggesting that the following15· steps at a minimum be taken that -- be taken to16· create a fair environment.17· · · · · · No. 1, exclude policyholders age 75 and18· older from these increases.· This has already been19· mentioned.· And the term that was used that really20· bothered me was the term discriminatory.· They can't21· make the changes because you -- they could not limit22· at age 75 because it would be discriminatory.

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·1· · · · · · Let me tell you what the word·2· discriminatory means as far as my clients.· I have·3· clients in their 80s, and they are presented with a·4· fact that their premiums are going to dramatically·5· increase with John Hancock 32 percent, or they are·6· given an option, they can have a landing spot of 4.3·7· percent.· Okay.·8· · · · · · But if they require care in ten years and·9· they take the 4.3 percent option, they have saved a10· couple thousand dollars -- several thousand dollars11· in premium in the short run.· And in the long run it12· will cost them tens of thousands of dollars at the13· time they need care.14· · · · · · And this story can be told again and15· again and again.· I see it all the time.· I live it16· every day.· And there is leveraging too because when17· you have a level -- it's only a 15 percent increase.18· But a 15 percent increase to a 55 year old versus a19· 15 percent increase to an 80 or 85 year old, a big20· difference in terms of absolute dollars.21· · · · · · And the actuaries in the room know that22· I'm absolutely right in that statement.· That's

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·1· where the discrimination takes place.·2· · · · · · The increases are much, much larger at·3· older ages.· It has a much greater impact on people·4· who are older.· And, so, what we are doing is we are·5· at the expense of these older policyholders, the MIA·6· is guaranteeing the bottom line of insurance·7· companies.·8· · · · · · What the actuaries mentioned was all we·9· want to do is to get back at break-even.· And what I10· am saying is, you made mistakes, absorb the losses.11· It is a -- it is a shareholder problem not a12· policyholder problem.· And you just have to accept13· the losses.· Because what is happening is incredibly14· discriminatory.15· · · · · · Continue the 15 percent limit in16· Maryland.· Once a rate increase has been granted, no17· additional rate increases shall be implemented for a18· period of time of five years.· Going forward once a19· policyholder has held a policy for ten years or more20· and has reached age 75, there should be no rate21· increases.22· · · · · · I ask the companies to work with the MIA

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·1· to find an answer.· I understand the company's·2· problem.· If the company were here in the State able·3· to -- providing policies and if they weren't able to·4· pay claims, that would be a problem.·5· · · · · · But MassMutual, is that really a problem?·6· John Hancock, is that really a problem for you?· Are·7· you financially going to go under because of this?·8· You made mistakes.· Absorb the losses.· Stop·9· foisting this on the consumer.10· · · · · · I know we all want to provide the11· consumers with a fair insurance environment so the12· important financial decisions that are made are13· based on reasonable expectations of premium costs as14· well as policy performance.· Transparency is a good15· first step.· Fair accountability should be the16· second.· Thank you.17· · · · · · COMMISSIONER GRODIN:· Thank you,18· Mr. Hutman.19· · · · · · MR. SWITZER:· Thank you very much. I20· regret if this is redundant, but I just wanted to21· see if it elicited some more thoughts from you22· because I am interested, to state the obvious.

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·1· · · · · · So, as far as who bears the brunt of the·2· consequences of what's happened, one more time on·3· what's being done so far, the 15 percent cap.· We·4· covered that.· The other that the companies when·5· they originally priced these policies generally·6· speaking, every assumption was exactly right,·7· expected over the life of the 20, 30 years of the·8· policy to pay out 60 percent of premium in claims.·9· So, the rest are brokers, administrative costs,10· everything else.11· · · · · · So, another way that consequences are12· being felt is that again some companies are pricing13· for the break even.· I know you spoke to that.14· We've also -- there has been laws that for all the15· business here forward it has to be 85 percent, not16· 50 or 60.· There has to be some consequence there.17· · · · · · If the company hasn't asked for 80, the18· MIA has looked at lifetime loss ratios up to 80 or19· so for the reasons that you have laid out.20· · · · · · I appreciate what you passed on in the21· brochures, and I thought it was interesting that22· Company A said it at the time, while the company

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·1· reserves the right to raise future premiums for all·2· policyholders by State and class, it has never had·3· to do so since it pioneered long-term care.· And·4· your premiums will never increase due to a changes·5· in your health status or age.· I understand from the·6· consumer, that's perceived a certain way.·7· · · · · · For nonforfeiture, we have tried to·8· advocate for -- obviously if I were -- had long-term·9· care and had invested so many years of premium in, I10· would be very reluctant to just lapse.· I have got a11· lot of skin in so far.12· · · · · · So, trying to at least make -- for those13· who have to lapse, it more advantageous for them to14· lapse.· They will be left with some money to pay15· claims.16· · · · · · We have reduced even the 15 percent17· increases here at the MIA when it's warranted by the18· actuarial facts as we see them.· We have brought up19· ideas such as if you have new policies, to have a20· little mercy for people over age 75.· As you have21· alluded, that's another way.22· · · · · · We have always looked at, is this the

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·1· first increase in quite a long time?· Maybe -- and·2· it's been brought up that waiting has a lot of·3· premium increase implications if you haven't acted·4· earlier.· Grading increases.· We've also tried to·5· employ rigor, that you are projecting things that·6· will get very bad in the future, that demonstration·7· needs to be airtight.·8· · · · · · So, these are some of the things that we·9· looked at.· And I understand where you're coming10· from.· But I think in summary my question for you11· is -- I know I have stated again what the charges of12· the actuaries, not inadequate, not excessive, not13· discriminatory.14· · · · · · But from what's being done so far, the15· question is is it enough.· And we're still asking16· ourself that question constantly.· But is only a17· denial what you feel is the right course?· I don't18· know if that's the right way to ask the question,19· but I hope you know where I'm coming from.20· · · · · · MR. HUTMAN:· I don't think denying the21· rate increases is necessarily the answer.22· · · · · · MR. SWITZER:· Okay.

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·1· · · · · · MR. HUTMAN:· My concern is the extent and·2· the continuity in the rate increases.·3· · · · · · MR. SWITZER:· Okay.·4· · · · · · MR. HUTMAN:· They never seem to end.·5· Okay?· My policy, I have had five increases from·6· Genworth.· I have had six increases from CNA.· I'm·7· not dropping my policies.· I'm going to continue to·8· pay the premiums, because I know what the facts are.·9· I know what the probabilities of my requiring care.10· Okay?11· · · · · · But in terms of finding -- finding that12· fair balance, that middle ground, what I'm trying to13· convey is that enough weight has not been given to14· the fact that the reason that we have the problem15· today is because companies were overly aggressive in16· their pricing, in their underwriting 15, 20 years17· ago.· Okay?18· · · · · · They created this problem.· Had their19· pricing been correct, had their underwriting been20· correct, the extent of today's problem would be21· dramatically less.· Okay?22· · · · · · Look, none of the companies, the

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·1· companies invest their reserves, none of the·2· companies could have possibly foreseen what occurred·3· with interest rates in 2008 and 2009.· The cycle·4· stopped.· And some adjustment should be made for·5· that, and increases should be allowed for that.·6· · · · · · But morbidity assumptions, that is an·7· insurance company problem.· They knew the extent of·8· the problem or that there was a significant problem·9· in 1991.· Okay?· They knew there were underwriting10· issues by the middle of the 1990s.· They knew11· persistency was now a problem by the end of the12· decade.· Okay?13· · · · · · And we're talking -- what I mention is a14· policy that's taking place in 2001, and that's15· MassMutual started issuing their policies in 2000.16· They knew or should have known.· Okay?17· · · · · · And, so, what I'm asking the MIA to do is18· to temper the extent of the increases and look at19· the numbers within this broader context.· Numbers20· don't always mean what we think they mean.21· · · · · · MR. SWITZER:· Agreed.· Thank you.· That's22· helpful.· And I just wanted to relay that one of the

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·1· first things that Commissioner Redmer asks for when

·2· we put these in front of him and what we look at is

·3· the lifetime increases.· What's different from the

·4· first increase versus these members have already had

·5· a hundred percent of rate increases.

·6· · · · · · And also in reviewing the assumptions,

·7· the assumptions can change from the past.· They can

·8· change again in the future.· And that's part of our

·9· attempted rigor.· Thanks again very much.

10· · · · · · COMMISSIONER GRODIN:· Thank you.· Next on

11· our list of individuals who had asked to speak is

12· Ms. Spector.· Is Ms. Spector here or on the phone?

13· Okay.· Okay.· And I think that does it.· Yeah.· Oh,

14· I'm sorry, Ms. Rams.

15· · · · · · MS. RAMS:· ·Thank you.· I'm here --

16· · · · · · THE REPORTER:· You have to hold it up to

17· your mouth.

18· · · · · · MS. RAMS:· Sorry.· I'm here on behalf of

19· people my age who are in their 80s who cannot afford

20· the 75 or 50 percent increases.· I pay out of my

21· check, my Social Security every month just for

22· coverage $893 in medical coverage.· That is

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·1· disgusting.· And you're telling me you would like to·2· raise it on me.·3· · · · · · I think you have to put a limit on no·4· more than if you got to raise it, 15 percent.· We·5· can't afford it.· It cost me $510,000 to take care·6· of parents who didn't have long-term care.· I can't·7· afford that any more.·8· · · · · · If you raise it the amount you want, I·9· can't afford to live nor can a lot of people my age.10· I haven't slept at night since I heard about this11· increase.· That's a bad feeling.12· · · · · · You're young now.· You don't understand13· what we go through.· It is tough knowing that you14· may be thrown out or not being able to get medical15· coverage because you cannot afford it.16· · · · · · There has got to be some way that you can17· control how much you raise it.· I don't care if you18· do it by age.19· · · · · · Let me explain to you something.· The20· first long-term care company I was with for 12 years21· went bankrupt.· And nothing happened.· I wasted all22· that money.· By the time I could get in again I was

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·1· in my late fifties; so, my premiums are higher.·2· · · · · · If you raise this, there are so many·3· seniors that won't be able to sleep at night or will·4· give up food and where they live to be able to pay·5· for this coverage.· There has got to be some way you·6· can control this.· That's all I have to say.·7· · · · · · COMMISSIONER GRODIN:· Thank you,·8· Ms. Rams.· Is there anybody else here who would like·9· to speak in the room?10· · · · · · Is there anybody else on the phone?11· · · · · · Oh, yes, please.12· · · · · · MS. LEIMBACH:· My name is Sally Leimbach.13· And I've been an insurance broker specializing only14· in long-term care insurance since 1992.· I just15· wanted to add to the comments that were said today16· that when the MIA is reviewing the options that are17· going to be provided to the insureds who are facing18· rate increases, that they -- they look to be sure19· they are as creative as possible and as fair as20· possible.21· · · · · · I'm aware for instance with the22· partnership programs in Maryland for long-term care

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·1· insurance, if you are 75 or younger, you're required·2· to have some kind of compound inflation included on·3· your policy.·4· · · · · · So, if an insured decided, okay, I will·5· eliminate my inflation protection and will reduce my·6· premium, they may be giving up their ability to have·7· a partnership benefit if they so qualified at claim·8· time.·9· · · · · · I am aware that MIA was active about10· this, and it's my understanding that in Maryland11· 1 percent compound is now allowed.· So, the problem12· with that is will the insurance companies that did13· not file with a 1 percent compound be able to -- are14· they able to offer that as a way to mitigate costs,15· reducing from the 5 percent or the 4 percent or16· whatever they have had to a 1 percent compound.17· · · · · · I am unsure whether that takes18· legislation or not to make it easier for companies19· so that they don't have to do come with a costly20· refiling for existing policies that did not offer21· that at the time they were regularly filed.22· · · · · · Maybe there can be some kind of a

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·1· grandfathering done by the State of Maryland that·2· would allow all companies to be able to offer a·3· 1 percent.· I am not sure about all the legalities·4· and regulation.· But I do know that that would be·5· very helpful as an option for people not to lose·6· what they really did want to have, a partnership·7· qualified long-term care insurance policy, by·8· following directions from -- or options they are·9· given reduce their premium and perhaps not even10· realizing if they do away with their inflation, they11· are going to lose their partnership policy ability.12· · · · · · Thank you.13· · · · · · MR. HUTMAN:· May I ask one quick14· question?15· · · · · · COMMISSIONER GRODIN:· Yes.16· · · · · · MR. HUTMAN:· Let's assume in a perfect17· world, we are looking to the future, and they have18· come up with a means of -- and Alzheimer's becomes a19· controlled chronic condition, no longer leads to20· long-term care needs, and interest rates have gone21· to 10 percent, rates of return on invested reserves22· have gone to 10 percent, what is the process or the

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·1· mechanism for existing policyholders to have a·2· reduction in their premium?· What steps would the·3· companies take to see that that happens?·4· · · · · · MR. SWITZER:· To restate the question,·5· what if assumptions do change down the road,·6· Alzheimer's for example becomes controlled, interest·7· rates rise to 10 percent, what mechanism is in place·8· to reflect those changes, material changes in LTC·9· premiums?· Would those assumptions alone lead to a10· rate reduction?11· · · · · · Well, first, as you know -- to answer12· your question, the MIA monitors financial results13· every year for financial statements.· I would be14· inclined, my team and I, to engage the company about15· just like recently in December the tax cuts and jobs16· act for the affordable care market generated a fair17· amount of dollars for insurance companies, improved18· their tax bracket.· We asked them how is this19· reflected in your filing.20· · · · · · We would intend to do the same thing.21· The nuance to that is that typically obviously22· insurers file at their own volition, and we wait for

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·1· them to submit a filing.· We wouldn't wait.·2· · · · · · MR. HUTMAN:· But I'm a policyholder that·3· purchased a policy in 2005, the same answer would·4· apply?·5· · · · · · MR. SWITZER:· As soon as we saw these·6· kind of dynamics emerging, to ask the carriers what·7· are you doing about it?· And I know there would be a·8· time lapse to when we get from that conversation to·9· a rate filing to an approved rate filing, but we10· would be sensitive to the timing and the magnitude11· and what it would mean to a consumer to try to push12· it.13· · · · · · MR. HUTMAN:· Thank you.14· · · · · · MR. PLUMB:· Can I add something to that?15· · · · · · MR. SWITZER:· Sure.16· · · · · · MR. PLUMB:· The model regulation that's17· in effect now requires once a company files for a18· rate increase, you have to submit annual followups19· for three years to the insurance division.· And that20· three years can be extended for basically whatever21· reason the Commissioner decides.22· · · · · · And if it ever looks like you're not

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·1· going to meet the minimum loss ratio, which is 85·2· percent on the increase, then the Commissioner can·3· require the company to either increase benefits or·4· reduce premiums so they would meet the minimum loss·5· ratio.·6· · · · · · That only applies to policies that were·7· issued on average around 2002 and later.· But we·8· have -- we have supported doing that for all·9· policies in certain States that are concerned about10· the older policies.11· · · · · · And if the minimum loss ratio isn't being12· met after a rate increase, you have to adjust13· downward premiums.14· · · · · · MR. HUTMAN:· That you for the15· explanation.· That's helpful.16· · · · · · MR. ZIMMERMAN:· I think you stated a set17· of conditions that are -- what I will call unlikely18· but I have learned in the last couple of years what19· I think likely could happen.20· · · · · · But to everybody's point, I think Todd21· made the point earlier, we have an obligation to22· make sure rates aren't excessive.· That's really the

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·1· answer to your question.·2· · · · · · MR. HUTMAN:· Okay.·3· · · · · · COMMISSIONER GRODIN:· All right.· We will·4· go back to the phone.· Is there anyone on the phone·5· that would like to speak?·6· · · · · · All right.· Then this will conclude our·7· rate hearing today.· I want to thank everybody for·8· coming and everyone for dialing in.·9· · · (Whereupon at 10:33 a.m. the hearing concluded.)10111213141516171819202122

Page 84·1· STATE OF MARYLAND

·2· COUNTY OF HOWARD SS:

·3· · · · · · I, Susan Farrell Smith, Notary Public of

·4· the State of Maryland, do hereby certify that

·5· above-captioned matter came on before me at the time

·6· and place herein set out.

·7· · · · · · I further certify that the proceeding was

·8· recorded stenographically by me and that this

·9· transcript is a true record of the proceedings.

10· · · · · · I further certify that I am not of

11· counsel to any of the parties, nor an employee of

12· counsel, nor related to any of the parties, nor in

13· any way interested in the outcome of this action.

14· · · · · · As witness my hand and notarial seal this

15· 3rd day of September, 2018.

16

17· · · · · · · · · · · · · ·_____________________

18· · · · · · · · · · · · · · ·Susan Farrell Smith

19· · · · · · · · · · · · · Notary Public

20· (My Commission expires February 8, 2020)

21

22

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